Getting your business off the ground and growing involves more than simply coming up with an idea for a product or service and putting it to market. In drafting your organization documents, creating contracts and the other steps you will take in setting up the legal and administrative sides of your company, you, like others, may overlook creating a buy-sell agreement.
Establishing a buy-sell agreement for your business offers several benefits.
Creating clear transitions
According to NerdWallet.com, buy-sell agreements establish the transition of ownership of your business under certain circumstances. For instance, you will likely dictate in such a contract what should happen to the shares of a partner who chooses to leave the business or who passes away. Stipulating ahead of time the plans for handling such situations may aid in preventing potentially time-consuming and costly legal problems.
Retaining business interests
Due to circumstances that you do not expect or cannot control, business partners you never intended to work with may enter your operations. Through a buy-sell agreement, however, you may help lessen the potential for disruption to or the end of your company because you decided to sell your shares or, because of incapacity or death, can no longer be part of it.
Establishing a value price for shares
Disagreements commonly arise regarding the value of a partner’s shares in the business in the event of his or her exit. To aid in eliminating unreasonable expectations or claims of unfair buyout offers, your buy-sell agreement establishes such figures before a partner seeks to leave or the next of kin of a deceased partner pursues a sale.
To help protect your interests, as well as those of your co-owners, you may consider all your options when setting up your business. This includes creating a buy-sell agreement.