In our last blog post, we explained that, while an estate plan is important for everyone, it is especially important that small business owners put plans into place. As fundera.com explains. That’s because your business is not only about you, but about your employees, your customers, and your family members…
But it’s also going to be about your business partner(s), we explain to Geyer Law clients as we help them establish their businesses, emphasizing the importance of considering the “might-happens’, and doing that now..
Even for the smallest of businesses, there are aspects of business law that need to be considered during the framing stages, including not only selecting the right business entity, selecting the right location, securing financing, hiring and preparing employment contracts and partnership agreements, but also (yes, now!) thinking ahead about an exit strategy..:
Some day in the future, it might happen that you’re the partner who wants to sell the business and cash in, while your partner has no interest in doing anything of the kind. You could do a buyout and then sell, but getting out of the situation may mean taking a loss, according to smallbusiness.chron.com, quoting the National Federation of Independent Business. With a partner who refuses to sell or negotiate, you might be left with no choice but to file a lawsuit, and legal fees might add up quickly.
You can think of a Buy-Sell Agreement as a sort of “prenuptial agreement” between business partners, Small Business United explains. Such a legally binding agreement will detail when owners can sell, who they can sell to, and what price will be paid.
Even if partners reach an agreement, there’s a lot of complexity to consider, Kristen McKenna writes in Forbes, including structuring the deal, thinking of ways to retain key employees, tax planning, and cash flow planning post-close.
At Geyer Law, we know – the time to get ready to sell the business is when you’re getting ready to form the business!
– by Cara M. Chittenden, Associate Attorney with Rebecca W. Geyer & Associates