Entrepreneurs usually start a company intending it to continue for an indeterminate, yet lengthy, time frame. Whether thinking of starting a partnership or already co-owner of one, careful planning may help your company avoid confusion and inertia if an owner or key employee is no longer willing or able to participate. At Virtus Law, we can draft buy-sell agreements that will protect your company’s future.
A buy-sell agreement dictates how a business will handle certain types of predicaments. Scenarios like an owner’s divorce, bankruptcy, incapacity, retirement, or death could make it difficult or impossible for the company to carry on. Sometimes companies will run into trouble when employee shareholders want to leave the company or sell their shares. Buy-sells can prevent those shares from being sold to strangers. Trying to make business deals or satisfy contracts is hard enough without the added distraction of a protracted divorce, bankruptcy, a proxy fight, or probate proceeding.
An ideal time to work on a company’s succession plans is at its inception. There’s much excitement when partners start up a business, but, more importantly, there’s agreement. Everyone is working toward the same goal – having a successful company. This is the time to ensure business succession through buy-sell agreements. While working through the business start-up documentation, talk to your attorney about setting up buy-sell agreements also.
But if a business owner has not planned for succession when signing operating agreements and by-laws, it’s not too late.
Ensuring continuity for your company involves carefully drafted buy-sell agreements. It’s best to start thinking about this early in the life of your business, but thinking about it now is better than thinking about it never.
As an entrepreneur, business succession should be a vital part of your estate plans. Buy-sell agreements can be drafted and executed right alongside your other estate planning documents. After all, the ability of your company to carry on when you’re gone also benefits the heirs of your estate. When you speak with your attorney about estate planning, make the continued operation of your business a priority.
Contracts vary from industry to industry, company to company, owner to owner. There’s no one-size-fits-all, but buy-sell agreements typically include business valuation clauses, ground rules for how business succession is handled, definitions of triggering events, and so on. Arrangements may include buying life insurance policies for owners or key employees or setting up sinking funds to cover future business disruptions.
Buy-sell agreements are complicated. The attorneys at Virtus Law, PLLC, have the tools and experience to develop agreements that will protect your company’s future. To schedule an appointment, call us at 612.888.1000. Although located in Minneapolis, we serve clients throughout Minnesota including communities like Edina, Mendota Heights, and Red Wing.
