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Business Formation Tips for Partners: Use a Buy-Sell Agreement

Posted on : June 4, 2017
buy-sell agreements should be drafted by an AZ business lawyer

Change is the only constant among small businesses. A sudden departure of a partner, whether it’s due to divorce, choosing to leave the business or passing away, could happen at some point in time. Having a plan in place to assist your business navigate through this process can be critical. The use of a buy-sell agreement allows you and your other partners to plan for challenges when a partner suddenly leaves the business. Without planning ahead, this can leave conflicting issues behind for your loved ones and the other partners.

A buy-sell agreement discusses the future ownership of the business and what happens if a partnership change occurs. Critical business decisions are covered in a buy-sell agreement including the amount that an ownership interest is valued at, whether a partner can be bought out when he or she leaves the company, what events can ultimately trigger a buyout and who can purchase partnership interests when a partnership evolves.

Most businesses that fail to plan for these concerns find themselves dealing with conflicts and complex problems if the issue does arise. No one anticipates a sudden disability or divorce, but not looking into the future to consider the potential could jeopardize the business completely. Even if you don’t need the provisions inside the buy-sell for some time, having them outlined relatively close to formation gives a roadmap if someone must depart the business suddenly. Talking to a lawyer at the founding stages of the company is critical and the right business law attorney in AZ can help.

Some of the events typically included in a buyout agreement include a divorce settlement agreement in which a former partner or spouse is going to get an ownership interest in the business, retirement of a partner, the permanent disability or death of a partner, a partner filing for personal bankruptcy, or a foreclosure of a debt that was secured by a partnership interest. Consulting with an experienced busies formation attorney is strongly recommended if you are interested in putting together a buy-sell agreement. This could be a crucial component of your business formation plans and could help to eliminate conflicts and further legal costs into the future.

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Posted in : Patrick J. Monahan