There are many facts about buy sell agreements which new companies, LLCs and partnerships in San Diego need to consider. The integrated tax, legal, accounting and business advisory team provide sound counsel to those who are forming a new business. We help to prepare a great number of documents for our business clients, but the buy-sell agreement might just be the most important.
The buy sell agreement is one of the most complex business documents, and it is far too easy to make mistakes while completing it. Many small companies attempt to download forms from the web or copy contracts from a previous job.
One of the important facts about buy sell agreements is the number of important clauses and provisions required to protect a company doing business in California. How do you know which options to choose and which are absolutely critical to your present and future business success?
When new business partners come together to form an entity, they become closely entwined with one another. In fact, they become so closely entwined that under certain circumstances, such as if a business partner passes away, the other partner(s) will suddenly be in business with that person’s spouse and/or heirs. This is one of the reasons why buy-sell agreements are so important, and why it is so necessary to get professional help while preparing them.
There are several facts about buy sell agreements which must be thoroughly discussed and understood. If you’re not sure whether you need one for your company, consider the following functions and how they could serve you and your business partners:
- Acts as an estate planning tool for all business owners involved in an entity
- Gives business owners a set of protocols for valuing their ownership interests on which they all can agree
- Offers a means of allocating control of the entity among all the managers and owners
- Offers S-corporations an extra layer of protection against decisions that could end the S-election status of the corporation
- Provides closely held businesses with a market for the ownership of their interests
- Provides Limited Liability Companies (LLCs) and S-corporations with a means of maintaining adequate annual distributions to owners for paying taxes associated with the business
- Restricts how the ownership interests, such as stocks, can be transferred in order to protect each owner
All of the above functions help provide a solid plan and protocol for dealing with situations that could lead to complex and expensive developments and/or disagreements. It’s important for your buy sell agreement to be carefully crafted.