If you are a business owner, you are going to need to have a buy-sell agreement ready. Also known as a buyout agreement, this is a plan for determining the future of a business should you retire. If you have multiple owners, it can also determine the future of the business if someone wants out.
Since there are many small businesses, you might not think that you even need to have a buy-sell agreement. However, that would be a big mistake. Here are some reasons to have a buy-sell agreement for your business.
You don’t want your business to wind up in the wrong hands.
If you don’t have a buy-sell agreement, your business could end up belonging to someone that you don’t want. If there are multiple partners, you might not want a spouse or family members to get the business; a buy-sell agreement would list who is able to take over the business. This is especially true with divorces. Most people want to keep their ex-spouses out of their business.
You definitely need a buy-sell agreement if you have partners.
Partners can make everything a little more complicated. You’ll have to give them a way out if they decide that they need out. You might want out and you are going to need a plan of how you want to handle these conditions which happen when there are more than one person in charge. There may also be creative disagreements and it helps to have a plan in place.
If you don’t have a buy-sell agreement, your business might go downhill while everyone is fighting for a right to own it.
If there are multiple parties interested in your business, it could take several months or even years to determine what is going to happen to your business. This is especially true if it ends up in court.
No business can survive months without having someone in charge.
If you need to sell your business quickly, you may end up taking any offer that you can get, no matter how low it is.
Even the best businesses take time to find the right buyer at the right price. If you become injured and can’t take care of your business, you might have to accept any offer that you get, just to take it off of your hands.
Buy-sell agreements are for more than retirement.
Though most people assume that buy-sell agreements are necessary for retirement, there are other reasons why you need to have one in place. They protect you, your family, and your business against disability, divorce, debt, conflict, and even death.
Coming up with a buy-sell agreement can be challenging. Because of that, many business owners don’t take the time. Instead, they hope for the best. However, a buy-sell agreement is used to determine who is able to take over your business when you are no longer able. If you have partners, it will outline what will happen if one or more partners want out. It can also protect the business if there is divorce, conflict, or even debt.
By deciding on an exit strategy, you are already going to know what your business is worth and what is going to happen to it. There won’t be any nasty battles in court where you lose your business while everyone is trying to get a piece of it. You won’t have to take the first offer you get just to get rid of it.
You can’t afford not to have a buy-sell agreement for your business. Contact us for all of your legal needs. We can help you make sure that your business is going to be protected, after you are ready to retire.
The post Business Law: Reasons You Need a Buy-Sell Agreement appeared first on Dungan & LeFevre LPA.