Do You need a Buy-Sell Agreement When Starting a Business with Friends and Family

Starting a business gives you the opportunity to provide an innovative product or service to consumers. You can harvest your talents and control your own success in the business. Working for yourself gives you unprecedented freedoms and small businesses remain the cornerstone of the American economy.

Of course, starting a small business is also a risk- and you need to make sure you take the right steps to protect yourself. One of those steps is the creation of a buy-sell agreement. Creating a buy-sell agreement is necessary even when starting a business with friends and family. An experienced Las Vegas, NV business startup lawyer can help you to understand the importance of a buy-sell agreement and can assist you in negotiating and drafting a contract that protects your interests.  Call Pintar Albiston LLP to learn more about buy-sell agreements and other things you can do to make your business startup a success.

Starting a Business with Friends and Family

A buy-sell agreement establishes the parameters for what happens if any of the co-owners of a shared business need to leave the company for any reason. Buy-sell agreements are usually used with partnerships and other types of business entities where there are multiple different owners. The agreement will specify the terms under which any co-owner is able to exit the business. Typically, the agreement will address what happens if any of the owners divorce; pass away; become disabled or simply decide they no longer wish to remain part of the organization.

When starting a business with friends and family, you may not think you need a buy-sell agreement. You may be confident that you will want to continue to operate the business forever, or that you and your family members will be able to easily work out what happens if someone needs to leave. The reality, however, is that no one can predict the future. There may come a time when one or more of the co-owners needs to leave because of a change in circumstances. A buy-sell agreement will ensure that the departing owner is able to acquire the fair value of his investment upon his departure and it will also protect the owners who will remain a part of the business operations.

When starting a business with friends and family, it may actually be even more important to have a buy-sell agreement in place. Emotions can become elevated with family members in a way they don’t with business associates, which can make it difficult to be fair and objective if someone wants to leave.

Without a buy-sell agreement, your business could end up being co-owned by an ex-spouse after a divorce, even if none of the existing business owners like that person. You lose control over who inherits the business and you lose control of who you could end up working with. You could also be forced to deal with difficult questions about how to value the departing owners share of the business.

To avoid problems that could compromise the long-term viability of your company, talk to a lawyer about creating a buy-sell agreement when starting a business with friends and family. Pinter Albiston LLP can help with this startup document and with other legal issues when beginning your business.