If you have plans to sell your portion of a business, you are going to need a buy-sell agreement. You may want to sell your portion of the business for a variety of reasons, including the following:
- preparing to retire
- problems with one of the other owners that could not be resolved
- previously filed for bankruptcy
One of the main reasons you will need to have a buy-sell agreement is so that you will not have to cross your fingers that things will go as planned. If you fail to draft a buy-sell agreement, various things can happen, and they are not always good things.
You want to have an effective buy-sell agreement in place so none of these things will happen to you:
- The business becomes owned by the wrong person, such as a bitter ex-spouse, partner
- You may not be fairly compensated if you do not establish a buyer for the business ahead of time
- If people are fighting for your business in court, the business could eventually be shut down if no agreement is reached
When you have an effective buy-sell agreement in advance, you will not have to worry about the risks that were listed above.
Should You Have A Buy-Sell Agreement?
If you are in business with others, you will definitely need a buy-sell agreement because it will outline all the rights every owner has in regards to the progression of the business. A buy-sell agreement will give you and the other business owners many opportunities to ask questions and provide answers. You and the other owners can decide on the right steps to take if a conflict arises and no solution can be made. What would each business owner do if one decided to leave the business? What if someone becomes ill or dies unexpectedly? Will everyone have a plan?
Even if you are the only person who owns the business, a buy-sell agreement is still an important document to have. What if you eventually want to leave your business to one of your most trusted employees when you die? If you have drafted a buy-sell agreement, the employee can buy your business, and the money will be paid to those you have left behind.
Leaving The Business To The Right Person
When a business owner dies, becomes injured, ill, or disabled, the share of a business usually gets passed to a spouse, partner, children, etc. If a business owner files for divorce, the court can inform the owner that the share of the business and other assets has to be shared with the ex-spouse. If you do not want to leave your business in the hands of someone who doesn't know anything about your business and how you prefer to have it operated, you are going to need a buy-sell agreement.
Getting What You Want For Your Business
When you have a buy-sell agreement in place, you will specify how much money you want for your business. You will want to be fairly compensated for your business, or you will want your heirs to receive fair compensation for your business if you pass away.
We understand that it can be difficult to craft a buy-sell agreement, and it can be difficult to determine when you should create your buy-sell agreement. Fortunately, there are tools and resources available to help you. You do not have to feel overwhelmed or frustrated by buy-sell agreements. If you are willing to save your business and ensure that it continues to be successful even when you are no longer around to run it, do not hesitate to contact us today.