Imagine a situation where you own a company with your Business partner (will name her Jackie). Jackie is a computer engineer, who built a successful military/drone IT company with you in San Diego, California. Your company has several contracts with the federal government. Jackie’s professional knowledge is extremely important to running your business. Jackie has a husband, who never went to college and does not know anything relating to your IT business. What if one day Jackie dies in a tragic accident, does her share in the business transfer to you? Does that share go to the “know-nothing” Jackie’s husband? It can can completely destroy the business if you have to run a business with the husband. If you do not have some sort of an agreement, you may be heading to an expensive litigation battle with that husband. In order to protect your assets and your business in case your partner passes away, retires, divorces, or leaves a company, it is wise to have a valid Buy-Sell agreement in place.
When do I need a Buy-Sell Agreement?
- You want to restrict co-owners of your business from selling their share of the business.
- You may require the co-owner’s share to be sold to you in case the co-owner passes away, divorces, retires, becomes disabled, or becomes bankrupt.
- You may require the remaining co-owners to purchase the shares with you if one of the co-owners passes away, divorces, retires, or becomes disabled.
- You may set a fair buy out price in advance.
A Buy-Sell Agreement is valid in all all business entities, including corporations, partnerships, LLCs, etc. Ideally, you want to draft and have a Buy-Sell Agreement singed at the formation of the business or soon thereafter.
If you have a need assistance in drafting a valid Buy-Sell agreement please call our San Diego business attorneys at 619-357-6677. Trial attorneys at LAWSTACHE™ LAW FIRM specialize in complex business litigation, including business dissolution and litigation involving buy-out terms.