Going into business with a partner can lighten the load and potentially make your Georgia-based business a bigger success. That said, you need to protect yourself and the investment of time, money and energy you put into the business with a buy-sell agreement. Such an agreement comes in handy should you or your partner become unable to run the business.
Because you may not be familiar with buy-sell agreements, see what Northwestern Mutual has to say on the matter. When used correctly, they can result in a smooth transition in the future.
Valuate your business
One of the most essential aspects of a buy-sell agreement is your business’s overall worth. Have a professional valuate your business, then decide how to divide that value (and all ownership shares) between all business partners. It is a good idea to perform an occasional valuation over the years, so that you and your partners always know the most current value of your ownership shares.
Set up financial resources
Should the day ever come that you have to buy ownership shares, that money has to come from somewhere. Common sources include cash, installment loan payments, sinking funds and life insurance policies. In most cases, life insurance policies present the most cost-efficient option.
Choose a structure
A majority of buy-sell agreements are either cross-purchase plans or entity-redemption plans. With cross-purchase agreements, all surviving partners purchase a portion of the deceased owner’s ownership shares. With entity-redemption agreements, your company has to either redeem a departing partner’s shares or buy out those shares.
By knowing more about buy-sell agreements, you set yourself and your business up for success. Be sure to share the above info with your partners.
