Partnership Solutions

Partnership Solutions

Every partnership is bound to present advantages that make the collaboration worthwhile.  There are also bound to be difficulties that are, in some cases, insurmountable. It’s a wise decision to plan for inevitable discord between parties. With the help of experts, we can create legal, contractual structures and advise on negotiations that correspond to your needs.

Why do I need a buyout agreement?

A buyout agreement is like a prenuptial agreement for businesses. It will legally bind all partners to the agreed-upon method of handling the sale or buyback of an ownership interest in the event of a partnership change.

If you and your partners do not have a buyout agreement, your partnership might have to be dissolved by law if one partner decides to leave the state and start his own business in another. This could force you and your partners to divide all the assets of the business and rebuild from scratch. Buyout agreements also protect against the aftermath of the death of a partner, which may bring his or her heirs into the business.

Even if your partnership is not coming to an end, you and your partners may still disagree on who should buy an ownership interest of a departing partner and how much the ownership interest is worth. There have been numerous legal battles over the valuation of an ownership interest at the time of sale because the business owners failed to form a buyout agreement that specified a valuation formula. These mistakes almost always lead to costly litigation and business delays.

Buy-sell agreements, as with most contracts, can get quite complicated. Before you agree to the terms and sign such an agreement, be sure to have a business organization attorney review it. Even if the attorney finds no issues with the contract, it will afford all parties peace of mind.

One recommendation we often make is the inclusion of a clause to guarantee liquidity in the event a contract is dissolved. This provision may protect certain parties from being forced into selling assets, borrowing money, or going bankrupt.

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