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Buy and Sell Agreements

Trustworthy California Attorney Drafts Business Buy and Sell Agreements

Experienced Irvine business lawyer implements safeguards for your company

If you started a business with a partner, have you stopped to consider what would happen to your company if that partner were no longer around? What if your partner died or was incapacitated? What if the partner simply wanted to sell to another party and move on? What would be left of the company you built? There are important questions you must answer, and the earlier you answer them, the safer your company will be. TransActionLaw.com can help you develop an appropriate buy-sell agreement that is fair to the separated and remaining partners. Drawing on more than 30 years of business law experience, I draft terms that protect you from a wide range of foreseeable circumstances so you can continue to prosper.

Essential elements of a business buy and sell agreement

The time to forge a buy-sell agreement is as early as possible. Ideally, the agreement should be contained in your original partnership agreement. Unfortunately, many partners don’t want to blunt the optimism of their new venture by bringing up what is essentially a business prenuptial agreement. Instead, they miss the opportunity to negotiate when everyone is still on good terms, putting the issue off until relations are strained by the sudden or impending exit of a founder. If you haven’t tackled this task yet, please take care of it as soon as possible.

When you do create a buy-sell agreement, be sure to include:

  • A valuation clause — Parties should agree on the method to be used to assess the value of the business. However, you must understand that standard formulae, such as “four times earnings before interest and taxes,” do not necessarily measure true worth. You might prefer to name a party you trust to assess the company’s value.
  • Terms for intellectual property — Your trademarks, trade secrets and patents have value. Is an exiting partner entitled to take business assets? How would that affect the cost of the buyout?
  • Specific terms for who a buyer can and cannot be — If your partner wants to sell, to whom should your partner be allowed to sell? Is there a prospective partner you would find unacceptable, either because of conflicting visions or personal style? If you’re concerned about your company getting “too corporate,” would you rule out a sale to an institutional investor? Would you insist that your partner could only sell out to other partners or family members? Speaking of family members, how would you feel about co-ownership with your partner’s spouse? This is an important consideration in the event of a partner’s death.
  • Process for financing — If your agreement requires your partner to offer shares to the other partners first, what happens if the other partners don’t have the funds to make a purchase? You can provide for a leveraged buyout or explore other options for financing the sale.
  • A tax plan — Finally, it’s important to understand that the sale has tax consequences. Fortunately, there are ways of structuring the deal to minimize the liability for all involved.

As a business owner, you must understand that even productive partnerships rarely last forever. Protect your investment in your business enterprise with a precisely crafted buy-sell agreement by someone who understands business law.

Contact TransActionLaw.com in Irvine for help with a business buy-sell agreement.

To protect your business now and into the future, you should have a buy-sell agreement in place with all key partners. TransActionLaw.com provides the trustworthy advice and determined representation California business owners need to safeguard their interests. To schedule a free consultation, call 949-668-1385 or contact me online.

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    Irvine, California 92618-4316
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