Business Planning - Buy-Sell Agreements

Often time individuals will form entities but fail to either provide rules of operation such as By-laws for a corporation or Company Agreements for an LLC. By doing so, the foundation for later problems has been laid without any rules as to how issues are going to be dealt with when some event occurs like the death of an owner, a divorce involving community property ownership of the entity, death of an owner, bankruptcy of an owner or even decisions on when, how and whether to buy, sell or add other owners. Thus, part of our representation and part of our agreement to form an entity to either start a new business or to convert an existing business involves not only some sort of operating agreement but also a buy-sell agreement. The buy-sell agreement can be part of the operating agreement or a stand-alone document. It is critically important that the owner(s) of an entity, no matter its form, decide on these important issues ahead of time and set forth agreements for dealing with in writing before such events occur when it is traditionally too late to deal with them.