Buy/Sell Agreement

Having a well-drafted buy/sell agreement is essential when creating an exit strategy. This agreement lays down the rules and regulations for what will happen when you and/or your partner leaves the business. Without a buy/sell agreement, you can look forward to a lengthy, complicated exit. A buy/sell agreement will allow you to leave your business when and how you want.

Here is what a typical buy/sell agreement will explain:

  • How to handle exit taxes and ownership interests
  • When a buyout is appropriate
  • Who can acquire your share of the business
  • How to handle exit taxes and ownership interests
  • How to protect trade secrets and competition rights

We strongly suggest that you consider seeking professional assistant to draft a buy/sell agreement between you and your partner. Here are a few things that you need to think about while creating such an agreement:

  • Do you plan to sell your business?You should plan ahead if you know you are planning on selling your business. Will you and your partner leave? Are you trying to reach a specific goal before letting your partner take over? These are important things to think about before starting your business. Your advisor should be able to draft an agreement that benefits you and your business partner.
  • When are you planning on retiring?You might already know a specific age that you want to retire. If you don’t, can you come up with a ballpark figure? If you tell your advisor this goal beforehand, you can set up a buy/sell agreement that honors your goal.
  • Do you want to leave your business to a family member?You can simply turn over the reins of a business you own yourself to a family member when you retire. It becomes harder whenyou have to consider your business partner. Let your advisor know if you want a family member to take over your share of the business if you retire or suddenly pass away.
  • What can trigger a buyout?Your advisor will probably suggest that you come up with a specific agreement concerning buyouts? You and your partner will save a lot of time if you decide what conditions warrant a buyout ahead of time. Ask for your advisor’s advice in this matter if you’re unsure of what to do.
  • Will you or your partner be able to buy back your share?This is another important decision. What will happen to your share if you are retiring and you don’t plan on leaving your share of the business to anyone else? A buy/sell agreement can guarantee that you get to leave with your share of the business.
  • What will happen to your business after you leave?? Your buy/sell agreement can include a clause that prohibits a competitor from taking over your shares. You will also be asked not to go to work for a competitor or give away any trade secrets. This is a way to ensure that your business will continue on in your absence without any outside interference.
  • If you or your partner dies, how will your family be cared for?Let your advisor know if your family will still be depending on how well your business does if you pass away. A buy/sell agreement can make sure that your family gets a just share of any business profits. This can save their financial future if you bring in the majority of your family’s income.
    The professionals at SOGO understand how important it is that you create an exit strategy that is beneficial to you, your business partner(s), and your families. Contact us today and let us help you create a buy/sell agreement that does just that.