Do I Need a Buy-Sell Agreement When Going Into Business With “Friends and Family”?

When going into business with friends or family members, you may be full of hopes for the future. With visions of how successful your company will be, you may not stop to consider what happens if you start to disagree or if someone decides they want to leave the company. You may also not stop to think about what will happen when one of the co-owners of the business dies.

A failure to plan for all possible future contingencies can create major disagreements, undermine the value of your investment or result in you owning the business with someone you do not want to work with. You need to protect yourself from these possibilities and you need to do so with a buy-sell agreement. The creation of a buy-sell agreement is essential for anyone who is going to co-own a business, even if the company is started with friends and family.

The Irvine, CA business law attorneys at Brown & Charbonneau, LLP should be consulted for help with the creation of a buy-sell agreement when you start your company. Call today to learn how an experienced attorney can represent you.

A Buy-Sell Agreement Can Protect Your Investments

A buy-sell agreement, or a buyout agreement, establishes the procedure and process for what happens when one of the co-owners of a company decides that he or she will be leaving the business. Depending upon how comprehensive your contract is, it may set the price for the ownership of the entity or establish the process for determining how much an ownership share is worth. The agreement will also typically dictate who the ownership share can be sold to; giving first rights to the co-owners or guaranteeing that the co-owners have a say in the sale.

The buy-sell agreement protects the person who wants to leave by ensuring his investment can be fairly valued and giving him an exit strategy.

It also protects those who intend to continue operating the business. Without a buy-sell agreement, disputes over what happens when someone wants to leave could interrupt operations and undermine the ongoing ability of the business to operate. The business could also fall into the hands of someone the co-owners dislike or do not want as a partner.

For example, if a co-owner of the company dies and there is no buy-sell agreement, his wife, kids or other heirs could inherit his share in the company. If the remaining co-owners do not want to work with the heirs, this could create a problem if the heirs want to be involved.

Likewise, if one of the co-owners divorces, his or her spouse could get an ownership stake in the business and the co-owners could be forced to work with that ex spouse. A buy-sell agreement can help to ensure this does not occur.

Brown & Charbonneau, LLP can provide assistance with creating a buy-sell agreement that protects your company’s future and your investment. Call today to speak with a member of our legal team and learn more.