Events like an owner’s health challenges, disability, retirement, or death don’t have to end the business. Creating a buy-sell agreement as part of a business succession plan can help you, as a business owner, work toward a smooth transition to a new business owner while protecting yourself, your business, and your employees.
At Merlino & Gonzalez, our experienced attorneys provide tailored legal counsel related to buy-sell agreements and business succession planning. We work closely with clients to draft buy-sell agreements that protect their personal and business interests. Our team has successfully supported clients ranging from family-owned businesses to large corporations.
Buy-Sell Agreement and Business Succession Planning
The future is unpredictable, and many businesses aren’t prepared for an owner’s departure through retirement, death, or illness. A buy-sell agreement is a legally binding contract stating how and to whom an owner’s shares will be transferred to the new owner or co-owners. These types of agreements can ensure a smooth transition during the business succession process.
As a business owner, a properly designed buy-sell agreement allows you to maintain control of your business until disability, retirement, death, or another specified event. When you create a buy-sell agreement, you will have control over how the ownership of the business will change when you are no longer the owner. Taking the time to determine what you would like to happen will help you and your employees by providing an orderly transition of business management and ownership during your lifetime or at death.
What to Include in a Buy-Sell Agreement
When working with an attorney to draft a buy-sell agreement for your business, it’s important to include several key provisions to ensure the document is effective and legally enforceable. Start by specifying what triggering events will initiate the process of selling the business. Triggering events can include the following:
- Death
- Disability
- Retirement
- Loss of professional license
- Divorce
- Long-term disability
- Personal bankruptcy or insolvency
- Conviction of a crime
- Withdrawal prior to retirement
The agreement should outline the method of valuation for the business or shares. Choosing an effective and fair valuation method will help you ensure a fair price is agreed upon. The value of the business or shares can be determined by a third-party appraisal or with a pre-established formula.
The buy-sell agreement should address whether the current owner has the right of first refusal, allowing them to purchase shares before offering them to outside parties. It is also important to stipulate the payment terms and whether the purchase will be made through one or more lump sum payments or installment plans.
The agreements should include clear guidelines for resolving disputes and ensure all parties have a way to address disagreements that may arise during the buy-sell process. When you work with Merlino & Gonzalez, we will ensure your buy-sell agreement includes all of these important provisions to help facilitate a smooth transition and safeguard the interests of all involved.
Buy-Sell Agreements Should Meet Your Unique Goals
Succession plans and buy-sell agreements should be tailor-made to fit the owner’s business model and goals. Our legal team is prepared to consult with those involved to create a buy-sell agreement that meets the goals for the future of their company. For example, if the goal is to keep the business or ownership shares within the family, we can create a retention plan so that the owner’s spouse, adult children, or other relatives can retain control.
In other cases, preserving the business’s institutional memory is important. In these situations, the buy-sell agreement should include the use of advisors to Aid the transition team and ensure a smooth continuity with day-to-day operations. Whatever your business succession planning goals, we can create legal documents that reflect those goals and protect your interests.
Creating a Buy-Sell Agreement for Family-Owned Businesses
Creating a buy-sell agreement is particularly beneficial for family-owned businesses. It helps address potential conflicts and ensure a smooth ownership transition within the family. This agreement should clearly outline the specific terms under which ownership shares can be bought or sold. Clarifying who will receive ownership care can help minimize disputes among family members during difficult times such as illness, retirement, or death.
Establishing a clear plan for ownership transfer can help family businesses maintain stability and continuity, preserving both business and familial relationships. Additionally, a buy-sell agreement can enhance a family business’s overall value, as it demonstrates to potential investors or buyers that there is a well-thought-out succession plan. Well-established succession plans can foster confidence in the business’s longevity.
Providing Business Owners with Experienced Legal Counsel
If you are a business owner inquiring about selling your business or contemplating purchasing one and becoming its owner, Merlino & Gonzalez is ready to assist you. We can provide guidance throughout the process of buying or selling a business. Buy-sell agreements often contain complex legal language and details.
It’s important that you fully understand what you are signing. We can meet with you to carefully review the document together and ensure you understand all the terms involved in the transaction. We also prepare initial agreements and negotiate any terms that may not be favorable to you.
We take the time to grasp your business objectives, allowing us to suggest the best strategies tailored to your situation. Our attorneys can help clarify the advantages and disadvantages of buying or selling a business, empowering you to make an informed choice.
Contact a Buy-Sell Agreement Attorney in New York
Drafting an effective buy-sell agreement is crucial when creating a business succession plan. At Merlino & Gonzalez, we provide our clients with personalized legal counsel. We will help you fully understand the terms and implications of the buy-sell agreement. If you’d like to learn more about how a buy-sell agreement can help you meet your business succession planning goals, don’t hesitate to contact Merlino & Gonzalez to schedule an initial consultation.