Will You Still Love Me in the Morning – Buy and Sell Agreements Crucial

Before going into business with a partner, make sure a lawyer drafts
up a buy-sell agreement that covers what will happen in the event of
death, disability, “disillusionment” and the transfer of the interest
in the business at retirement.

Just because you go into partnership with another person, with all
of the best intentions in the world, doesn't mean that at some point in
time you may not have a falling out over – well, over any one of a
number of things that happen when trying to run a company and stay
friends and partners. No matter whether the form is a partnership,
limited liability company or corporation, making sure the principals
have properly prepared buy-sell arrangements is critical.

Think that will never happen? Think again. It's a far too common
occurrence and many people have made the mistake of not dealing with
this eventuality in a buy-sell agreement, and have lived to regret that
decision. The essential parts of this type of contract must be outlined
in detail by your corporate lawyer and include an evaluation method for
the business and how to pay out in the event of the big four – death,
disability, disillusionment and transfer of the interest in the
business on retirement.

If you're having trouble imagining what kinds of situations would
make you have a dust up with your business partner, speak to your
lawyer. Most corporate lawyers have seen it all and been there and done
that. That's what they're paid for, to craft a buy-sell agreement that
will withstand any of the above-mentioned eventualities.

The importance of having a buy-sell agreement in place cannot be
underestimated. It is a crucial document that will ultimately ensure
the continuation of your business and allow your family a return on a
lifetime of your hard work. Caution: this will only happen if there is
money behind this agreement. No cash can end up in a major disaster, as
the agreement may obligate more than the signing parties. It may
obligate family, heirs and partners. Without cash, no one will be able
to carry on the empire or have any security.

These issues need to be discussed in great detail prior to signing
anything and they need to be resolved to the satisfaction of both
partners. If something does happen and one party wants to pack it in
because they fell out of "love" with their partner, they need to be
covered for this possibility.

Of course, before getting that far into drafting an agreement, the
crucial question of where will the money come from to fund it needs to
be asked, along with how much will you need and whether or not,
realistically, you are able to afford it. Remember, that without money
in the background, a buy-sell agreement is potentially worthless. A
worthless contract without money backing may have serious consequences;
just ask your lawyer to fill you in.

In the meantime, while you are waiting to have that buy-sell
agreement drafted, make a list of important questions to ask your
lawyer such as "How much money in before tax dollars do we need?"
"Where does the money come from?" "How much money in total is required
to live up to the terms of the agreement?" Make the list a substantial
one, because these kinds of agreements need to be discussed in great
detail. Your lawyer knows this and will walk you through the sticky
parts.

Roni Balint writes for the Law Office of Alan M. Insul. The content
contained within this feature is not intended as legal advice and does
not constitute an attorney-client relationship. To learn more, contact Los Angeles business attorney and California corporate lawyer, Alan M. Insul by visiting Insullaw.com.