Buy Sell Agreements

You've found that cute little mom-and-pop business, that sexy sidewalk cafe, and decided to branch out to expand your weekend market homemade bakery stall into a viable business option, and wouldn't you know it? you just found the perfect outlet to make your dreams come true.

Once you're over the initial excitement of taking the next step and ventured into discussions with your attorney about leasing the premises, you also need to sort out a Buy Sell Agreement - aka Buyout Agreement or Buy Sell Agreement Form - in the unlikely event that life throws you a curve ball when you least expect it. Not only does the agreement help protect you if or when disaster strikes, it also covers your backside should anything happen to you, the business owner.

So what is a Buy Sell Agreement? In its rudimentary form, the buy sell agreement is your insurance policy for unexpected changes on the horizon. For instance, what would happen if your business partner/s, investors (maybe even the silent ones), co-owners or other 'power' people in our company, either retire, leave, become unwell - or, God forbid - pass away on you. For that matter, even if any of those normally unspoken things happen to you and you have to deal with the fallout. The last thing you want to have happen in a health scare or someone up and leaves suddenly is find the tax department and financial institutions are banging on your door at all hours, demanding their share of the pie. To say nothing of the heirs of your co-owners making their presence felt.

The most common way to think of a Buy Sell Agreement is in terms of another common form - the prenuptial wedding agreement that many couples sign as a protection going into their loving relationship. In the same way, you can think of the Buy Sell Agreement as the business version of the marriage one. If it happens to be that you're going into business with your beloved as well, then in a sense, maybe both agreements apply. Think of it as less about 'what will they take from me if I don't have it set in stone', and more about 'hey, I came to the party with these assets, this type of experience, work history and knowledge, and the Buy Sell Agreement notarizes those things so that we have a strong solid foundation build our successful business.'

The agreement also covers provisions for divorce, disability, death, (the 3 ugly 'D's), buyout, retirement, voluntary or involuntary transfer of the business to other entities. It wisely foresees the possibility of bankruptcy of the company. Furthermore, it also spells out who can control what, how much influence they can have in all-important business affairs, as well as whom they can sell the business to (if that ever happens), how much for, and even when. It’s pretty remarkable and potentially far-reaching for such a simple document.

Who should have a Buy Sell Agreement? Almost anyone who has their own business can have an agreement from sole trader LLC to partnerships, corporations and proprietorships. In the same way that a wedding pre-nup is signed before the big day, it's smart to pen your signature to the Buy Sell Agreement either prior to business purchase, or shortly thereafter. Talk to your attorney about it.