A buy/sell agreement is a legal document that protects the rights of business owners and investors that intend to leave the company. These agreements set the terms that allow disinvestment, and they often include provisions to protect the company from a sudden and fatal loss of operating capital.
Just like any relationship with two people, the breakup of a company and its investor can be ugly. However, you can reduce some unnecessary conflict by working with an Alpharetta buy/sell agreements lawyer. A seasoned partnership agreement attorney at Sparks Law can help you draft a contract that will protect your investors and your company. Let our team review your case today.
Despite the name, a buy/sell agreement has little to do with the documentation necessary to purchase a business. Often referred to as buyout agreements, these contracts govern company procedures when a co-owner or minority partner leaves a business.
There are many facets to a buy/sell agreement. For example, these documents can determine each party’s right to purchase the departing owner’s shares. The buyout contract could also give certain owners the right of first refusal or allow the leaving owner to sell their shares to anyone.
A buy/sell agreement can also specify what type of events would trigger the buyout of a co-owner. For example, your contract might state that you will initiate the buyback of a partner’s ownership stake if they die, retire, or leave the company.
These agreements often set the value of an owner’s share of the company as well. By setting out the method of calculating share values in writing, these agreements can avoid substantial litigation over the value of a buyout.
These are only some of the most common issues addressed in buy/sell agreements. You should develop your contract with your company’s specific needs in mind. A diligent lawyer can assess your business and draft a buy/sell agreement that works for you, your co-owners, and investors.
There is no legal requirement to have a buy/sell agreement in place. Many businesses operate without them. However, it is best to work with a local attorney to execute a buyout contract at the moment of business formation. It is impossible to predict when the agreement could become necessary, so it is best to retain legal counsel and get started sooner rather than later.
In many cases, a company does not have the liquid capital needed to pay the full value of a buyout in cash. This is especially true for businesses with a small number of partners. A buy/sell agreement can be beneficial in situations where a full buyout might bankrupt the company. For example, a contract could include flexible payment terms that offer installment payments with a set interest rate. If you need help structuring your buy/sell contract, you should consult with an Alpharetta lawyer right away.
When you form a new business, you must plan for the future. You may not think that your partners will leave the company, but the reality is that many partnerships are short-lived.
Fortunately, a buyout contract can protect your business in the face of uncertainty. An Alpharetta buy/sell agreements lawyer can help you draft the document and ensure your rights are protected. Call Sparks Law as soon as possible to learn more.
