Buy/Sell Agreements are an important tool for businesses with more than one owner. The Buy/Sell works to provide financial and managerial security to the business and its owners by providing answers to the questions of how, to whom, when and at what price an owner may sell an ownership interest in the business.
Traditionally, Buy/Sell Agreements have been used to prevent many things including: stock from getting into the hands of outsiders; an owner from continuing to own stock when that owner is no longer actively involved with the business; shareholders from selling their stock to one another in order to disrupt the balance of power within the business; and, to provide a market for stock which may be otherwise unmarketable.
Without a Buy/Sell in place, business owners can end up spending exorbitant amounts of funds determining the sale price of an ex-partner’s interest in the business, or even working and owning the business with someone they may never have had any intention of getting into business with.
If, as an example, an owner of your business gets a divorce, dies or becomes disabled while still owning a stake in the business, you may want that owner’s stake in the business sold back to the business. Otherwise, you may end up with a judgment attached to your business for the benefit of an ex-spouse, or even having your recently deceased partner’s family as your new business partners. By putting certain rights into place early on, your business is better protected in the event that the unfortunate may occur later on.
We create custom designed Buy/Sell Agreements that specify certain “triggering events” that will put the Buy/Sell into motion. Such triggering events are very often things like retirement, divorce, bankruptcy, death or disability. When a triggering event occurs, the Buy/Sell comes into play and stipulates a price for stock or ownership rights, or some way in which to determine a price to be paid. The Buy/Sell also acts to ensure certain other rights that may then become available to the various parties to the agreement such as distribution of assets, rights to purchase shares, or the right to sell ownership interests to a third party.
The fact is, running a business is never easy, so there is no reason to add to the list of potential complications. Things do not always work out as planned, but there is no reason why your business cannot plan for the unexpected. By working with the attorneys at Gabriel Law Office, PLLC to put a Buy/Sell Agreement together for your business today, you can help to make a difficult period in the future flow much easier. Let us help you make sure that legal issues are not an issue for you or your business.