When you are starting your company or your business is growing, there are a lot of different things that you need to do in order to protect your company's future. The sheer amount of paperwork that you need can be overwhelming, from licensing to leases to contracts with those providing you with financing.
However, one of the most important types of legal documents that could be essential to the future success of your company is a buy/sell agreement. A buy/sell agreement is something that many businesses need to have so that the interests of co-owners of a company are protected.
The agreement needs to contain important provisions that address the issues that arise when any owner must depart or chooses to leave. An attorney can provide you with assistance in understanding what should be in your buy/sell agreement and in drafting a contract that protects your investment.
Your company needs a buy/sell agreement because it is inevitable that, at some point, at least one of the owners of the company is going to want or need to move on to other endeavors.
If a company owner gets sick or passes away, this can create a problem for ongoing operations when that owner can no longer be involved. If you do not have a buy/sell agreement in place, a person who passes away or who decides to leave for any reason could generally give or sell his or her shares to anyone that is preferred. This could leave the other owners working with someone they don't like and/or who knows nothing about business operations.
Buy/sell agreements can help ensure that a company doesn't fall into the wrong hands, generally by giving the co-owners first chance to buy and potentially by also including other restrictions on a transfer of company ownership.
This type of agreement isn't just helpful if someone dies or becomes disabled. A buy/sell agreement can also help to keep a company from falling into the wrong hands if a co-owner of a company gets divorced and his or her spouse wants an ownership stake in the company.
It also protects not only the owners who will continue to be involved in company operations, but also the right of the person who has made the decision to leave the organization. If a buy/sell agreement is drafted properly with help from a business law attorney, the contractor likely will contain appropriate clauses that specify how a person's ownership interest is to be valued when that person must leave.
This can prevent a lengthy dispute about the best method of valuation, and it allows all co-owners to negotiate fairly on the issue since decisions will be made on valuing company ownership before such time as anyone is departing. None of the owners will know if they'll end up being the one who must leave, so it will be in everyone's interest to create a fair method of determining what ownership is worth.