San Diego Business Contract Attorneys
What is a partnership or LLC Buy-Sell Agreement and why is this an important business document? Business owners who have other partners (partnership) or members (LLC) need to give serious consideration to the question of what will happen to a partner or member interest in the company in the event of retirement, divorce, personal bankruptcy, incapacitation due to an illness or accident or the death of a partner or member.
The Partnership or LLC Buy-Sell Agreement may very well be the most important document a partner or member may sign. This important document allows the partners and members to decide in advance how these life situations will be handled. An effective buy-sell agreement provides income for the estate or trust associated with the partner or member interest while protecting the other partners or members from unwanted business developments or a partnership dispute or dispute between members down the road.
For example, if “Pete” is a partner in the partnership and has voting privileges and Pete passes away unexpectedly in a car accident, Pete’s wife would be entitled to Pete’s ownership interest in the partnership unless his estate plan or trust specifically stated otherwise. You treasure Pete and are glad to have him as a business partner. You might or might not want to be partners with Pete’s wife.
This is the reason for a Partnership or LLC Buy-Sell Agreement. The attorneys at the Watkins Firm have decades of experience in business formation and business contracts and will help you and your fellow partners or members to develop the right “triggers” within a buy-sell agreement.
What are “Triggers” in a Partnership or LLC Buy-Sell Agreement
“Triggers” are the type of event which activates the terms of the Partnership or LLC Buy-Sell Agreement and an obligation to sell or buy an ownership interest. The triggers include many of those events listed above (divorce, retirement, death, etc.) but also may include a violation or breach of an obligation within the entity, such as the inability to make a required capital contribution.
The Watkins Firm helps our clients to establish the appropriate triggers for the type of business your partnership or LLC represents. Triggers usually open the door to one of the following rights:
- An option for one partner or member to buy out the interest of the selling partner or member
- An option for the selling partner or member to force a buying partner or member to buy out the selling partner or member’s interest (also called a “put right”)
- A mutual obligation on the buying partner or member and the selling partner or member to sell the partner or member interest
Usually the remaining partners or members want to make sure they have the right to buy the seller’s interest but are not forced to do so if they cannot afford to do so. The partner or member who has triggered the event usually wants to ensure their partner or member ownership interest will be purchased if something happens.
Contact Experienced San Diego Buy-Sell Agreement Attorneys
The quality of your contracts will define the extent of your partnership or LLC profits and your vulnerability to litigation. Contact the experienced and proven business and contract attorneys at the Watkins Firm or call for a free consultation at 858-535-1511. Our clients value the quality, substance and candor of our advice, and the cost-effective manner in which we serve them.
Protect your new partnership or LLC and the interests of each present and future individual partner or member with a well-crafted and enforceable Partnership or LLC Buy-Sell Agreement.