Commercial law

Buy Sell Agreement for Regulating Business Transactions

When starting up a new business, there are a number of legal contracts that must be drawn up. One of these is a buy sell agreement, which is also known at times as a buyout agreement. While no one wants to think about what will happen should a co-worker or co owner of the building die or move on, this is an important subject. This document is created in order to help clear up any confusion that may arise as a result of that happening. To get started with drafting a proper contract, it’s a good idea to call on the help of a lawyer or legal team that is experienced with this type of document.

In basic terms, this agreement is a contract that is signed by both owners of the company or several owners if there happen to be more than two. A buy sell agreement could be compared to a prenuptial agreement in a way, in that it is a contract that divides up the property and assets of the business should one party leave. This is highly recommended by legal experts, as a sort of business will. For example, if one co owner passes away, than a certain percentage of their profits could be passed on to their next of kin. If this contract is not signed, then it may be unclear who those profits go to.

Sometimes the buy sell agreement also applies to companies in which there are a large number of investors. Those investors each own a small part of the company. By signing this type of contract, their stake in the company doesn’t disappear if they do, but instead is passed on to the person or party of their choosing instead. It’s a way of maintaining who is in control, in terms of investment value.

When you start the process of drafting legal documents, unless you have specific training in this field it can be a good idea to consult the legal advice of corporate or business lawyers. They can help you draft the documents that are necessary, and be sure that you are able to reach an agreement with all the partners you are working with. A little bit of advance legal preparation can go a long way, and the buy sell agreement isn’t necessarily the first type of contract that people might think of if they are starting up their first business. That’s why a lawyer’s advice can be an extremely useful tool in this matter.