How to Create a Buy Sell Agreement Template Step by Step
If a business owner retires, it doesn’t mean that the business will end. A business owner may do succession planning providing a transfer of business ownership & management. One of the tools you can use is a buy sell agreement template. It lets the owner discuss the future of the business.
What Is a Buy-Sell Agreement?
A buy and sell agreement can be defined as a binding legal document outlining the agreed terms & conditions of business partners regarding the re-assigns or transfer of the partner’s share in business when he/she retires, passes away, or exits the business.
This kind of agreement can also be called buy-out agreement, business preened, and business will. This kind of agreement is usually used in closely-held corporations and partnerships. It is mostly used in an attempt to have good transition in the ownership transfer from one to another.
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Having buy-sell agreement template is very helpful for a business partner to manage a complex situation. It will also protect the business & both interests. It states restrictions for business owners to sell their interests to investors without approval from all parties. It is also helpful to determine its value.
Why Is the Buy-sell Agreement Needed for Business?
There are a few things to be considered in selling business shares or transferring business ownership to the new one. That’s why a business owner needs to establish a written document entailing ownership terms & conditions. This is where such an agreement is needed for business.
This kind of letter is important because it establishes fair value price for shares. Besides that, it sets & develops effective exit strategies, too. In addition, it also makes a business continuity plan as well as protects the interest of surviving business owner. One more, it allocates entity control.
Key Elements of a Buy-Sell Agreement
A buy-sell contract template has a few key elements. They include:
- Parties Involved
You have to outline detailed information about the business seller & buyer.
- Qualifying Events
This section outlines the events that will trigger the buy-out such as co-owners, conflicts, divorce, retirement, disability, death, etc.
- Valuation Clause
It refers to how much your business is worth. You have to write it accurately & professionally.
- Funding Terms
Here, you have to present funding options such as installment payments and insurance policies for a specified time period.
How to Write a Buy-Sell Agreement
First of all, you will need to look for a sample template. After that, you have to indicate the involved parties. Then, you should identify triggering events. For the next step, what you have to do is to state the terms and conditions of the business value & buy-out.
Now, you are required to provide the terms of payment. Last but not least, you will have to include termination grounds. If you have never written such an agreement before, just feel free to find, pick, and use our buy sell agreement template. You can also edit it to fit your needs.
