Forming a Georgia business with one or several partners offers you a chance to share the responsibilities and challenges business owners often face. You and your partners may have to share the profits, but you also help each other carry the load by using your different strengths and abilities. Whether you are family members, old friends from college or simply common investors, your partnership can be the mark of your future success.
However, nothing lasts forever, and you or one of your partners may one day decide you have had enough. How will you get out of your partnership without jeopardizing the venture for everyone involved? The answer lies in having a strong buyout agreement. A buyout, or buy and sell agreement, is a legal contract that clarifies what may happen when a partner wants to give up his or her share of the business.
The importance of a buyout contract
A buyout may be necessary if you or another partner has decided to retire, is going through a divorce, is having health issues or is moving away. Some partners simply want to try something new or focus more on their families. If a partner dies, you will want to have a plan in place for that partner’s share of the business, so it does not fall into the wrong hands. A buy and sell contract may outline these and other factors:
- What events might initiate a buyout
- When you or any of your partners can sell their interest in the business
- Who may purchase your interest
- How you and your partners will valuate your share of the business to determine its price
- What action you and your partners will take if you cannot reach an agreement on the value of the shares
- Whether you or the departing partner will face a restriction from starting a competing business or soliciting former clients after leaving
Unfortunately, if you do not have this legal document in place, the departure of a partner may mean the dissolution of the business, leaving the remaining partners in a dire financial situation. Additionally, because not all partnerships end cordially, a buy and sell contract can allow for a smoother transition when the departure is contentious.
Like with many legal processes, you can find documents for buy-sell agreements online. However, using a template is not advisable since your business likely has many unique factors and special considerations. Therefore, as early as possible in the formation process of your partnership, you would be wise to discuss your buyout plans with an experienced legal professional.