Buy / Sell Agreements

Knowledgeable Business Lawyers Serving Organizations of All Sizes in Traverse City and Grand Rapids Businesses

It is important to draft a buy/sell agreement if you are starting a business with a co-owner. This agreement provides for the sale of stakes in a business to other owners in case of various contingencies, such as one owner quitting. When you start a business with a partner and decide to create a buy/sell agreement, it may be sobering to realize how many things may go wrong. An experienced Traverse City business law attorney at the Neumann Law Group can help make sure that you and your partner think through the possibilities to ensure the creation of an effective and enforceable buy/sell agreement.

What Is a Buy / Sell Agreement in Michigan?

Buy/sell agreements are formal, legally binding contracts that are consulted by owners of businesses in case various triggering events arise. Triggering events may include an owner dying, quitting the business, getting divorced, or becoming incapacitated. The co-owners or partners of the business may be interested in working with each other but not necessarily with other family members or others who could come into the picture in case of death or disability.

Buy/sell agreements typically address triggering events that require an owner of the business to sell or offer to sell, set a purchase price for business interests, and provide payment terms. The agreement should outline important details such as the down payment, the number and frequency of installments, and the interest rate that will apply if an installment sale takes place.

What You Need to Know About Buy / Sell Agreements

The buy/sell agreement should be in writing and address a full range of triggering events, as well as how to address those events. Provisions are often made to sell an outgoing partner’s share only to the remaining owners or to provide for a series of steps to take when selling shares. For example, a buy/sell agreement may include a right of first refusal and an obligation of first offer, and it may provide a fair price in advance to anyone who chooses to sell shares. The agreement may address what happens when partners retire or hope to check out of the business for another reason. The agreement should include provisions that prevent people outside the business from getting too much power and affecting a company in a way that does not serve its best interest.

Advantages to creating a strong buy/sell agreement include developing a transition plan that may make things go more smoothly when the business is transferred, creating a market for a selling partner’s interest in a closely held business so that funds may be generated for an owner’s family in case of their death or disability, and establishing a value for the purposes of estate tax. There are advance-planning benefits for all the owners when a proper and thoughtful buy/sell agreement is created. Thus, not only can a properly drafted Buy / Sell agreement provide you and your partner with valuable certainty, but it can also reduce the risk of a business dispute down the road.

Are You Looking for Help Drafting or Enforcing a Buy and Sell Agreement in Michigan?

Buy/sell agreements may themselves be the subject of litigation. It is not possible to plan for every contingency, and in some cases, emotions run so high that a partner does not follow the agreement. However, an experienced Traverse City buy / sell agreement lawyer can help ensure that your agreement provides for all likely events, that your intentions are accurately formalized, and that the possibility of any future disputes is minimized. If you are building a business with others, you should discuss contingencies and develop a buy/sell agreement with the assistance of an experienced Michigan business lawyer. At the Neumann Law Group, we work with business owners in Petoskey, Warren, Holland, Muskegon, Saginaw, Detroit, Kalamazoo, Lansing, Flint, and Ann Arbor, as well as areas throughout the Upper Peninsula. Contact us at 800-525-NEUMANN or via our online form to set up an appointment with a corporate governance attorney.