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Why Do You Need a Buy Sell Agreement Lawyer

Why Do You Need a Buy Sell Agreement Lawyer

Buy Sell Agreements

Buy Sell Agreement Lawyer

Why Do You Need a Buy Sell Agreement Lawyer?

A buy-sell agreement is a legally binding contract between the owners of a business where they agree on what happens to a partner’s shares in the event of life-changing situations that may result in chaos that could potentially ruin the business and bankrupt its owners, assuring the remaining owners that the business will carry on successfully.

A Buy Sell Agreement Lawyer Helps Transition the Business Ownership.

The Buy Sell agreement is also heard of as a buyout agreement, a business will, or a business prenup. Comparing a buy sell agreement with a prenuptial agreement is the most accurate comparison: In a prenuptial agreement, you can get out of the marriage under certain conditions. 

At the same time, you can protect your financial operations. A buy sell agreement offers the same rights, just with one small difference. In a Buy Sell agreement you can cover all the financial transactions between the business partners. This makes a buy sell agreement more reliable and more effective in terms of financial stability.

A buy sell agreement defines your rights when it comes to difficult situations.

Your partner can fall ill or become unable to operate the business the right way. In that case, a buy-sell agreement lowers your financial risks of bankruptcy or debt. You can protect yourself by signing an agreement that will keep your business intact.

Two Common Types of Buy Sell Agreements Are:

 

  • Cross-purchase agreement, and
  • Redemption agreement
  • A cross-purchase agreement happens when the remaining owners decide to purchase the shares of the business that is for sale. In this matter, it is important to know that the mechanism relies on a life insurance policy.
  • A redemption agreement is another form of a buy sell agreement. Here, we have a situation when the business entity buys the shares of the business. With a redemption agreement, the contract limits the ability of business owners to sell or transfer their ownership stakes in the business.

Some businesses decide on a mix of the two forms of agreements, with some portions available for purchase by individual partners and the remainder bought by the partnership. The importance of a buy sell agreement covers most of the financial risks that may occur in the business.

How to Know If a Buy Sell Agreement Is Right for Me

If you plan to start a business with a partner, a buy sell agreement can offer many protective points that can change your business perspective.

Many life situations are inevitable and we can rely on this kind of contract when the official regulations are necessary for business operations.

Your business partner may go ill or die, and that is when a buy sell agreement comes into effect. Your business capital will be protected and you can continue all the future business operations.

Here are some potential situations that a Buy Sell Agreement would prepare you for:

  1.  Personal Bankruptcy of one of the owners;
  2.  Business owner’s retirement;
  3.  Disability of one of the owners;
  4.  Irreparable disagreement between partners;
  5. Death of one of the owners.

Cross-purchase buy and sell agreements contribute to the rights of the business owners.

As a remaining business owner, you can buy the interests of the selling owner. This applies when a selling owner is no longer capable of maintaining their business obligations. 

Buy and sell agreements are also important in the method of determining the overall business value at the beginning of the business as well as when one of the business owners remains the only owner.

Careful drafting of a buy sell agreement can also eliminate or lower any potential estate taxes that apply at your death.

In the situation when you want to pass your ownership interest to one of your family members at your death, avoiding the estate tax is one of the possible outcomes.

What Can I Get From A Buy Sell Agreement?

A Fair Value Price for Shares

A Buy Sell Agreement is a perfect way to establish the Fair Value of your business individual stake. This agreement sets the figure ahead of time, preventing disagreements between partners about whether a buyout is or not fair.

Facilitates the break up of the partnership 

The Buy Sell Agreement minimizes the stress of the disintegration of the partnership, having designed a legally binding strategy to be followed in the case a partner exits the company 

Lets owners decide on the future of the shares

The Buy Sell agreement specifies who is entitled to your stake if you exist, preventing owners fighting over shares or third parties deciding on the future of your company. The uncertainty can be avoided with a well-crafted agreement.

Do I Need a Buy Sell Agreement Lawyer?

A buy sell agreement lawyer is necessary if you want to avoid state taxes and protect your business capital and operations. With a buy sell agreement, you will be able to buy shares of the business and prolong your business perspective.

A good buy sell agreement lawyer can help you draft the buy sell agreement that protects both your business partner’s interests and your interests. You will have the right to continue the business operations even in the case of illness or death of your partner. 

It is possible to stay protected and define a new business strategy with a buy sell agreement. A good buy and sell lawyer can help you craft and improve the right contract that protects you in the case of inevitable circumstances.

 

When Should I Make a Buy Sell Agreement?

The perfect moment to create a Buy Sell Agreement is way before the ownership transition, when all the owners are equally involved and an orderly transition can be planned for. 

Since at the time the buy sell agreement is being executed the owners may not even know who would be bought out, when and why. Hence, relationships between the owners would be presumably good so they would most likely come to an objective consensus on the terms.

If you wait for the triggering events to occur, relationships may be strained, and not having a solid buy sell agreement may result in conflict, potentially becoming extremely expensive for all the parties. 

Making sure that the terms of the buy-sell agreement are in writing and having the owners agree to those terms beforehand helps to eliminate the potential conflict. 

The buy sell agreements doesn’t need to be a separate document. It could be included in the company’s shareholders agreement or in the partnership agreement. 

The important thing is not to assume that you have one, and always make sure to keep it updated and clear in what your specific intentions are, amending the existing agreement or creating a new one if necessary. 

Do I Need a Buy Sell Agreement if I Am the Sole Proprietor of My Business?

Even if you are the only shareholder in your business, you should still consider to have a Buy Sell agreement to make sure your assets are protected in the face of any eventuality. 

The Buy Sell Agreement is a clear outline of your intentions for the future of your company that will be taken into consideration once you no longer have the power to voice it. You certainly would be saving your heirs, and employees unnecessary trouble.

What Important Things Should I Consider in My Buy Sell Agreement?

Avoid the use of Ambiguous Language

Since the purpose of your Buy Sell Agreement is to prepare for any possible eventuality involving one of the owners, you should make sure the statements in the agreement are the clearest possible so you prevent conflict between the stakeholders the moment the sale is executed. 

Unclear language in contracts tends to represent further conflict between the parties involved, which can only mean negative financial repercussions for you.  

Worst Case Scenarios Must be Considered

It doesn’t matter if probabilities are very low, you should have a Buy Sell Agreement that takes into consideration all the possible scenarios. You want to have every precautionary clause possible to assure you the best outcome.

Set the Objectives Of Your Business Straigh

All of the owners should not only understand, but also agree with the short and long term objectives of the company. If this concordance doesn’t happen and the owners have varying objectives it may be difficult to outline a good Buy Sell Agreement.

Beware of Taxes

You should get assessment on the tax consequences of shares exchanging, to prevent you and your business from losing a lot of money. A good Buy Sell Lawyer can guide you to make the right moves when it comes to avoiding getting wrecked by taxes.

If you are looking for a Buy Sell Agreement Lawyer don’t hesitate to contact us.

Thomas Howard

Thomas Howard

Real Estate Lawyer

Whether this is your first land use issue or most recent, our office has helped people and businesses alike.

Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.
R. Martindale

Need A Business Lawyer?

Call our law offices with your legal questions for help on:

  1. real estate contracts
  2. business contract disputes
  3. Shareholder litigation
  4. cannabis business
  5. fraud actions
  6. mechanic's liens

 

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    Practicing Law Without A License

    Practicing Law Without A License

    Practicing Law Without A License

    Practicing Law Without A License

    Practicing law without a license is a terrible idea that happens to some professionals, consultants or real estate agents may go over the line.

    Be careful when carrying out your professional relationships and know where the line is for what your jurisdiction considers the unauthorized practice of law.  

    In this article – we cover when some professional may enter into the unlicensed practice of laws and how to avoid it.

    Unauthorized Practice of Law

    Illinois, like all states, prohibits the practice of law by individuals not admitted to practice in the state. Illinois sets this forth in the Attorney Act, 705 ILCS § 205/0.01 et seq. Section one of the Act provides that:

    “No person shall be permitted to practice as an attorney or counselor at law within [Illinois] without having previously obtained a license for that purpose from the Supreme Court of this State[.]”

    The Illinois State Bar Association provides a wealth of Ethics Opinions on this topic. 

    The Illinois Supreme Court has long held that the practice of law involves giving advice or rendering of services which require the use of legal skills or knowledge. People ex rel. Illinois State Bar Assoc. v. Schafer, 404 Ill. 45, 87 N.E. 2d 773, 776 (1949). That is, the “practice of law” is much more than simply going to court or representing someone in litigation. Here are just a few samples of activity which constitutes the “practice of law” in Illinois:

    1. Representing someone in an arbitration, even if the arbitrators aren’t lawyers (ISBA Opinion No. 12-17)
    2. Assisting or advising someone in completing corporate documents, even documents provided by the Secretary of State (ISBA Opinion No. 95-7)

    Representing someone in a property tax appeals in many Illinois jurisdictions (In re Yamaguchi, 118 Ill. 2d 417, 515 N.E.2d 1235 (1987)

    What Crosses the Line for Unauthorized Practice of Law?

    The line for unauthorized practice can get especially blurry with high volume practices like residential real estate and consumer bankruptcy, in which lawyers rely heavily on paraprofessionals to process a large volume of often duplicative paperwork. The important distinction for these kinds of practices is that non-lawyers can perform administrative tasks like simply filling out information (names, addresses, etc.), but once they start making changes to the forms themselves, they may be stepping over the line and into unauthorized practice. This risk is especially serious for lawyers working in high volume practices, and lawyers who work frequently with other professionals like accountants and financial planners.

    Here are some simple tips for staying on the safe side of the law.

    1. ALWAYS ask first. If you have any questions as to whether sometimes constitutes the practice of law, then ask. Lawyers should foster a culture in which paraprofessionals never hesitate to err on the side of caution.
    2. Let your clients know. Make sure they are clear on what kind of services they are receiving, and make sure there’s no confusion as to who is and is not a lawyer. If you work with another professional services firm, make sure to use distinct letterhead.
    3. Create clear Roles, Responsibilities, and Expectations (RR&E, in business lingo). Administrative staff should understand that they’re doing administrative tasks. E.g., they might be filling out information in a form, but they should not be drafting forms.
    David Silvers

    David Silvers

    Regulatory Lawyer

    Whether this is your first land use issue or most recent, our office has helped people and businesses alike.

    Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.
    R. Martindale

    Need A Business Lawyer?

    Call our law offices with your legal questions for help on:

    1. real estate contracts
    2. business contract disputes
    3. Shareholder litigation
    4. cannabis business
    5. fraud actions
    6. mechanic's liens

     

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      Attorney Modification Clauses & Your Real Estate Sale Contract

      Attorney Modification Clauses & Your Real Estate Sale Contract

      Attorney Modification Clauses

      They let you cool off.

      Has it been 5 days Already?

       

      Relax.  You probably blew the deadline & were none the wiser.

      Chances are that you signed a real estate purchase contract and are having second thoughts.

      Sometimes realtors like to confuse you and say you should put in an offer – well, that means a contract.

      So see what Peoria Real Estate attorney, Thomas Howard has to say about a clause in the contract that allows for attonreys to disapprove.

      You can call Attorney Thomas Howard at (309) 740-4033.

      Questions?

      Your case needs strategy – for the right case, we give a free one hour session. Get yours today.

      Thomas Howard

      Thomas Howard

      Peoria Real Estate Lawyer

      Whether you’re a bank or distressed asset purchaser, Thomas Howard can help you quickly recover on your loans.

      Peoria Office Address

      Public Policy Behind Attorney Modification

      Sometimes people fall in love at first sight, but not just with people. A person shopping for a house may fall in love with a home, and put in an offer, but only to later realize she or he has been entered into a binding contract. 

      Let’s run through the fundamentals of a contract in the context of a home sale & how an “attorney modification clause” can help you get out of the contract with some help.

      A contract had 3 basic elements

      Attorney Modification Disapprove

      He Does Not Approve

      • Offer & Acceptance: When you put in that offer on the house, you actual began to form half of the deal.  If the seller accepts your offer on the house, you’re hooked.  So when shopping for a home and making an offer, lower your expectations – and increase the chance of your rejection so you can think it over better.
      • Consideration: This is money.  You offered to pay ‘x’ dollars for that house – if we assume that you offered to pay the statistical average price for the home – $199,200 is what you are going to pay because according to Google that pointed to a CNBC article claiming that is the median price for the home in the United States – believe it or not.
      • Meeting of the Minds: This is the most complex of the three basic contract elements.  It is where a lot of the disputes occur.  Some people think they are buying apples, when instead they are buying oranges – and they never would have bought an orange had they known.  Mistakes of fact happen fairly often.

      Attorney Modification & Public Policy

      Most people that buy a house and get in trouble are lacking in home buying experience.  So to protect these first-time and novice homebuyers, public policy has worked into many of the forms of residential sales contracts an Attorney Modification clause that gives each party the right to have their attorney review the contract.

      If your attorney does not approve of the contract within a very limited period of time, in Peoria Illinois it is five days, then it can be canceled.  Often the price cannot change because the clause itself states the rights.

      Your contracts mean what they say

      A court of law does not exist to make the deal for you.  That is between the private parties that enter into lawful, legally binding contracts.  

      Why one of the most American things you can do is make a deal.  But be careful when getting into them – because a deal rushed into may be a costly error.

      In real estate law, there is a saying.  “There are no small problems when it comes to real estate.”  So be careful, and have your attorney consult with you immediately after you signed the deal to confirm you want the deal before the attorney modification period expires. 

      If you have a contract dispute, call our offices at (309) 740-4033.

       

      A commercial loan workout attorney with over ten years experence – Thomas Howard answers your questions in the video below.

      Thomas Howard was on the ball and got things done. Easy to work with, communicates very well, and I would recommend him anytime.

      R. Martindale

      Need A Business Lawyer?

      Call our law offices with your legal questions for help on:

      1. real estate contracts
      2. business contract disputes
      3. Shareholder litigation
      4. cannabis business
      5. fraud actions
      6. mechanic's liens

       

        REACH US BY EMAIL