What is the importance of a buy-sell agreement during business formation? Why should the owners, members, investors and/or shareholders focus on this important document during the start-up of an LLC or Corporation in San Diego or Southern California?
Important from the Outset of Your San Diego Business
There are many important decisions that should be made during the business formation process of a new business start up. One of the most important is the establishment of a buy-sell agreement as part of the corporate documents of your new company. This critical business document is important when there is more than one owner or partner in a business. It protects the new company from unforeseeable challenges down the road, and provides a solution ahead of time for these problems.
It’s Not a Matter of If…
When you are starting a new business in San Diego, you aren’t necessarily thinking of everything that might go wrong, or the challenges that will inevitably arise. After almost four decades of service to the San Diego business community, the business attorneys at the Watkins Firm can tell you “its not a matter of if, its a matter of when.” What will happen in the event of the death of one of the owners, partners, principle shareholders or members? What if one of the ownership group becomes incapacitated due to an accident or health issue? How will ownership interests be protected from outside influences during personal challenges such as divorce or bankruptcy? What happens if one of the stakeholders is unable to contribute additional resources during a crucial phase of the business or during a “capital call?”
The Importance of a Buy-Sell Agreement During Business Formation in SoCal
It’s the “what if’s” that establish the importance of a buy-sell agreement during business formation. Everything at the start-up is “positive expectations” and “let’s get this thing going.” The buy-sell agreement addresses these issues when everyone is upbeat, cooperating and working together in the company’s best interests. It provides important “triggers” and a process for developing a fair “valuation” if the need to purchase one of the ownership interests arises. Without an effective buy-sell agreement, these issues become quite contentious and often lead to expensive and time consuming litigation. This distracts the company from its primary business focus and consumes valuable corporate and personal resources and cash flow.
Proven San Diego Start Up Business Attorneys
What is the importance of a buy-sell agreement during business formation? This important corporate document prevents expensive and time-consuming disputes down the road, and ensures that the company will survive and thrive no matter what happens in the personal lives of its owners. It develops a fair mechanism in advance to protect each owner’s interest and the company’s stability while ensuring stakeholders receive a fair and full value for their ownership interest if they must sell.
This is also one of the great advantages of working with the experienced San Diego business formation attorneys at the Watkins Firm. Many entrepreneurs attempt to save a few dollars by downloading corporate forms from some website and then filling in the blanks themselves.
The Watkins Firm has literally helped to establish thousands of Southern California businesses. Our attorneys work with clients to establish a cost-effective start-up package which includes one-on-one guidance and counsel from proven successful business owners and lawyers. This may not add a lot to a start-up budget, but the Watkins Firm’s start-up package provides extensive counsel and custom-tailored documents to help your company to not only get off to a strong start, but to have the firm foundation to achieve short and long-term success.
We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
