Schedule a Consultation: 858.483.9200
Buy-Sell Agreements Should be Reviewed Annually
If you are running a San Diego partnership, limited partnership, closely-held corporation or an LLC, it is important that you have a well-crafted buy-sell agreement. If you do not have one, it is time to have one written. A good San Diego corporate attorney can help. If your company already has one, it is just as important to review and revisit the buy-sell agreement on an annual basis for the following reasons:
- Changes in your business over the last year
- Changes in your life and in the lives of your business partners
- Changes in the law
As most know, a buy-sell agreement is not an agreement about buying or selling a business. Rather, a buy-sell is an agreement between owners of a business that establishes procedures/limitations on when and under what conditions the owners can sell their ownership interest(s). A buy-sell agreement is triggered by various events that are listed therein such as retirement, death, when an owner goes bankrupt, becomes divorced or disabled, when a partner just wants to separate from the business, or the other owners want him or her out. Here is a quick rundown on issues that can be avoided or managed with an annual review of your buy-sell agreement.
San Diego Buy-Sell Agreements: Changes in Your Business
There are two inherent advantages of an annual review of your company’s buy-sell agreement – advance planning and managing owners’ expectations. The annual review, which does not have to be intensive or complicated, allows for management to summarize the company’s past performance and future expectations. If expansion is contemplated, then maybe new owners are considered. As such, a review of the buy-sell agreement will show if changes are needed and/or remind the owners how new business partners are added.
Conversely, if last year’s revenue and profits did not meet expectations, what impact (if any) does that have on the buy-sell agreement, the formula chosen for setting the price and the method(s) chosen for easing the payment mechanism? Having some advance warning will help the owners manage expected growth and possible new owners or also manage problems that need to be resolved.
San Diego Buy-Sell Agreements: Changes in the Lives of Owners
Obviously, it is wonderful news when owners get married and expand their families. Generally, the good news is announced with fanfare and enthusiasm. By contrast, bad news with respect to marital troubles, illnesses, and financial difficulties are generally kept confidential. Moreover, civil and social manners frown upon asking too many questions. Thus, an annual review of the company buy-sell agreement can be an opportunity to legitimately inquire into such subjects. Again, the review does not need to be intensive or complicated. A simple question thrown out: “So, is everyone’s marriage good?” Everyone can laugh, or possibly, an owner might take the opportunity to mention that there are some problems at home.
San Diego Buy-Sell Agreements: Changes in the Law
There are occasions when a statute or case law impacts provisions contained within a typical buy-sell agreement. Such impacts are not limited to changes in business or corporate law, but include changes to laws with respect to:
- Inheritance
- Divorce
- Bankruptcy
- Tax
- Labor
- Disability
- Worker’s compensation
- Health and health care
- Insurance
- And more
An annual review of your buy-sell agreement can ensure that it always remains in compliance with the laws and continues to reflect the intent and desires of the owners.
San Diego Buy-Sell Agreements: Contact San Diego Corporate Law
For further information, please contact Michael Leonard, Esq. of San Diego Corporate Law. Mr. Leonard has the experience to help you conduct an annual review of your buy-sell agreement and can provide necessary revisions. Mr. Leonard can also review, create, and assist in executing business contracts and assist with any other business-related matter. Contact Mr. Leonard by email or by calling (858) 483-9200.
You Might Also Like:
Legal Services Needed By San Diego Businesses
How Insurance Can Make a Buy-Sell Agreement “Easy” for Death or Disability
