Buy-Sell Agreement

Buy-sell agreement is important legal form of document when you establish your business entity, such as forming a limited liability company as your business structure.

Actually it is mandatory by state statues that the owner should conform to its regulation and enter into this buy-sell agreement. Also when you want to form a limited liability company (LLC) or conventional corporation, you are strongly recommended to have buy-sell agreement by solid business planning stage.

The buy-sell agreement would prevent owners from selling their interests to a 3rd party without the written consent of the other owners. Usually the agreement takes one of three forms:

Cross-Purchase Agreement -- This is the simplest form of the buy-sell agreement, and within this form, a withdrawing owner agrees to sell his interest to the remaining owners. It is suitable for the small business with only a few owners. This form can become unmanageable as the number of owners increase in the future. For a larger business, an entity-purchase agreement would be more suitable.

Entity-Purchase Agreement -- In this form of the buy-sell agreement, the withdrawing owner have to agree to sell his interest to the entity, which will then retire the ownership interest.

Hybrid Agreement -- This form is a combination of above two agreements. Typically, the withdrawing owner should first offer his ownership interest to the entity. If the entity declines or is unable to make the purchase, then the shares must be offered to the other owners.

Ensure that ownership certificates be endorsed with notice of the restriction on transfer which was created by the buy-sell agreement. In most cases, it is required by state statutes that a precise and clear language be used in the ownership certificates. Therefore you would better examine your own state's statute and verify language requirements for all ownership certificates.

A well prepared buy-sell agreement will describes how the interest would be sold. It will also specify how much the interest would be sold of. The agreement will also specify how interests would be valued when sold, thus avoiding any potential disagreements among owners.

It is possible that unexpected events would arise in the future that might force selling of an ownership interest, such as owner's bankruptcy, liquidation situation, or even worse yet, death or incapability. For maximum protection, insurance policies are often bought by owners and they would cover such circumstances.

If you are planning to prepare your own buy-sell agreement, make sure that you have written legal forms signed by you. Any signed document is legally binding, so consult with your own accountant or lawyer when in doubt. For easy downloadable forms, go online and search for Free Legal Forms and you should be able to find many general legal forms and documents such as bill of sale, power of attorney.
 

legalforms.name ©2006-All right reserved.

• 
  
• Home
• • Bankruptcy forms
  • Corporate forms
  • Employment forms
  • Financial forms
  • General forms
  • Real Estate forms
  • Rental Agreements forms
  • Service Agreements forms
  • Trademarks forms
  • Vehicles forms
  • Adoption forms
  • Business forms
  • Tax forms
  • Divorce forms
  • Legal Guardianship forms
  • Name changes forms
  • Patent forms
  • Civil harassment forms
  • Criminal related forms
  • Medical forms
  • Wills and Estate forms
  • Estate forms collection
  • Living trust forms
  • Living trust guide e-book
  • Living Will forms
• Directory
• Tell a friend
• Link to us
• FAQ
• Disclaimer
• Contact us