You and your partners are building a successful business. You know exactly how to manage it and what your plans are for its future—but are they complete? Many Atlanta business owners assume today’s success will carry into the future, but disaster can disrupt your business without a proper exit strategy.
You may anticipate a succession strategy if an owner leaves the business, but it is critical to put specific plans into writing. Before you think you need one, consult an Atlanta buy-sell agreements lawyer at Sparks Law. Our experienced attorneys can draft a contract tailored to your situation and help you protect your business.
Owners may leave a business by choice or non-voluntarily, depending on the scenario. Before this occurs, it is recommended that you discuss and memorialize what will happen using a buy-sell agreement. Through this contract, stakeholders can anticipate problems and outline agreed-upon solutions for partners selling their stakes. This is often key in preventing arguments and protracted litigation in the future.
Succession plans should be in place for all the following circumstances:
This list is non-exhaustive, and there are countless scenarios that you may wish to address in your succession plan. A local buy-sell agreements attorney can draft a unique contract and revise it as conditions of your business change over time.
A buy-sell agreement should contain several provisions that govern what your company should do when an owner departs. Without an agreement, disputes between owners and other parties may hurt the future of your business.
For instance, if an owner dies and the heirs do not want to sell, the company may end up with inexperienced owners if no buy-sell agreement is in place. If the heirs wish to sell, a contract can spell out who they may sell their ownership interest to. For example, a buy-sell agreement can state that the heirs must sell to the company, a provision known as a right of first refusal. This could also dictate how retiring or disgruntled owners may leave the business.
In a buy-sell contract, a cross-purchase clause allows each business owner to purchase insurance on the other owners as both the policy owner and beneficiary. When an owner dies or becomes disabled, the surviving owners use the insurance money to buy their business shares.
Similarly, a stock redemption clause outlines how the company can purchase insurance policies on each of the owners and redeem them to buy the deceased or disabled owner’s business interest. A skilled lawyer at our firm can advise on which clauses should be included in a buy-sell agreement to protect the Atlanta business and its owners.
When owners buy out other owners, the purchase price must be determined and defined in a buy-sell contract. Valuing the business at the startup price the owners invested could be unfair to the seller if the company has grown considerably. Using an earnings multiplier may not account for anticipated revenues or goodwill. A seasoned local attorney can draft a buy-sell agreement that includes provisions addressing the method of evaluating a business.
Although this is a good summary for what to include in a buy-sell agreement, there are many other factors to discuss, depending on your unique situation. Should departing owners sign non-compete agreements? How should the buy-out price be paid? The legal team at Sparks Law can go over every aspect of your business and ensure that no stone is left unturned.
Before a departing owner causes major problems for your business, your company should have an agreement in place that outlines how owners will sell their business interests and how those shares may be bought. Our Atlanta buy-sell agreements lawyers can work with you to draft a comprehensive contract that fits you and your business needs. Call us today to get started.