When entering into business with other people, it is wise to consider executing buy/sell agreements with your partners. Buy/sell agreements, otherwise known as buy-out contracts, determine partners’ rights if one or more people leave the company. If you are operating a business with one or more partners, you should consider meeting with a Georgia buy/sell agreements lawyer to draft and execute a contract that could protect your rights in the company.
A skilled partnership agreements attorney can advise you and your partners on the importance of having an agreement in place and inform you of the different clauses to include in such a contract. Reach out to a legal professional to get started on drafting your contract.
Buy/sell agreements are contracts that determine how partners, or their heirs, will be compensated for their share of the company by the remaining partners if certain “triggering” events require them to leave the organization. Events that often cause partners to leave businesses include:
It is best to implement buy-out contracts as early as possible, and when all partners are on good terms. These agreements may be executed upon the business’ formation or after the company is formed, so long as there is a mutual agreement among the partners. Waiting to enter into an agreement could cause unnecessary disputes among the partners when determining who is entitled to what. An experienced lawyer can help partners develop fair and equitable buy/sell contracts before an event causes someone to leave the business.
Although Georgia law does not require business owners to have buy/sell agreements in place, they present many benefits to partners and the company itself. Clear and unambiguous provisions in a contract could mitigate future disagreements. For example, buy/sell agreements that include terms limiting or describing the types of events that will trigger the agreement’s applicability will serve to inform all parties when the contract is enforceable.
Buy/sell agreements may include terms that determine whether triggering events would cause a mandatory buy-out of partners’ shares or merely give the remaining partners, business, or a third party an option to buy the shares. The inclusion of these terms allows all parties to know their rights and obligations under the agreement and plan accordingly. For instance, if a contract directs the mandatory buy-out of deceased or disabled partners’ shares, companies could plan for this event by buying life and disability insurance policies on the partners to help cover the costs of acquiring those shares.
Including terms that help determine the valuation of partners’ shares is important in determining how much the remaining partners or business will owe to exiting partners or their heirs. Because there is no way to predict how well the company will be doing at the time the contract will be enforced, it is best to avoid language that sets a fixed price for the shares. An attorney can assist business owners by devising provisions and negotiating terms in their buy/sell agreements that account for the present and future needs of owners and their families.
Whether you have recently started a business with another person or have been operating a company together for a while, you should reach out to a Georgia buy/sell agreements lawyer. An attorney can draft a contract that aims to protect your rights and address your business’ future needs. Contact us today to schedule a meeting to discuss your situation.