Buy Sell Agreement Template for Partnership-Based Business
Buy sell agreement is a must-have document if you plan to build partnering business. If you want to create it in simple and quick ways, you may want to download and use the buy sell agreement template which available for free here.
What Is A Buy Sell Agreement Between Partners?
Buy sell agreement is a contract document used by business partners. This document has legally binding quality. It lays out the outlined conditions in which the business is obtained by one of the partners, because of reasons such as the partner passed away or decides to leave the business.
Why Is Having Buy Sell Agreement Important?
There is a potential to put business at risk if you choose not to involve a buy sell agreement. In a way, it acts as clear and detailed succession plan to avoid disputes between partners or surviving spouses, which may result in costly high-cost litigation and wasted valuable time.
How Do You Write A Buy Sell Agreement?
There are two most common types of buy sell agreements, which are explained briefly below:
- Cross Purchase Agreement: This agreement type serves for two parties or more. It is used when there’s change of ownership and the shares are given to one partner to another.
- Stock Redemption Agreement: This agreement structure puts the focus on business or entity. If there are exchanged shares, then the partners can sell their shares back to the business or entity.
What should be Included in A Buy Sell Agreement?
Here are the essential components of buy sell agreement template:
- Identity of parties involved
The agreement is made between minimum to parties that act as buyer and seller.
- Determine the qualifying events
Discuss and decides what events that can hinder the partnership and cause the buyout, like death, serious illness, retirement, or divorce.
- Write down the valuation clause
Input information about the worth of the business as accurate as possible. It might be appraised professionally or determined by business value calculation formula.
- Insert the buy sell funding
It must be ensured that the buyer has financial capacity meet the terms of payments according to the agreement. There are some alternatives such as life insurance or installment payment for specific time period.
- Consider the tax
You need to know that the process of purchasing and selling business ownership is included in taxable activity.
When does a Business Need a Buy-Sell Agreement?
All of the businesses that based on partnership owners require buy and sell agreement as soon as it is established. It can be seen like a pre-marital agreement for business, which purpose is to protect interest of each party and set the terms and price for buyout in the events of death, retirement, divorce, and other leading events.
Luckily, the contract is easy to create and write, especially if you use buy sell agreement template. This way, you will have a concrete method to protect business in the future even if it operates after you are no longer involved.