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Buy-Sell Agreements

Experienced Arizona Lawyers Negotiate and Draft Buy-Sell Agreements

Phoenix business attorneys protect owners’ interests

If you own a business, you can sell your interest at any time. But if you are involved with partners in a closely held business, the situation is a bit more complicated. You want a high degree of commitment from a potential partner, so you don’t want it to be too easy for a partner to cash out. If a partner does decide to sell, you want to make sure the buyer shares the vision and goals for the company. You also need to have mechanisms in place for valuing the exiting partner’s share of the business and allocating rights in the company’s intellectual property. You also have to anticipate the financial impact on the company when a partner withdraws. For these reasons and more, you should put in place a sound buy-sell agreement when you form your company. At the Law Offices of Donald W. Hudspeth P.C. in Phoenix, our business attorneys have the knowledge and experience to craft agreements that protect your rights and your company’s future.

Essential elements of an effective buy-sell agreement

A buy-sell agreement is an important part of any business partnership. Ideally, you would execute a buy-sell when you form your company, but many businesses hold off until they’ve had a modicum of success and are contemplating the next phase of operations. Others wait until a partner is being forced to withdraw due to ill health or retirement. But it’s important to note that until you have drafted a buy-sell agreement, your business is vulnerable to unforeseen events, such as the sudden death or incapacity of a partner.

Here are the essential elements of an effective agreement:

  • Valuation — The partners must agree on the method of valuing the business at the time of sale. This valuation must consider assets, liabilities and revenue but must also estimate the worth of intangibles, such as the company trademark, trade secrets, patents and customer good will. The agreement must assign a percentage of ownership to each of the partners based on contributions to the company, with reliable benchmarks.
  • Triggering events — Buy-sell agreements consider a range of events that could compel a partner to sell, such as bankruptcy, death, disability, divorce, retirement, the opportunity to buy a business or simply the desire to move on. The nature of the event and the amount of time spent with the company can influence the partner’s share of the business.
  • Eligible buyers or successors — A potential buyer must be someone who wants to help guide the company to greater success. The partners should be able to veto a potential buyer who sees no future for the company and simply wants to sell off the assets.
  • Financing — What happens when a partner wants out but can’t find an acceptable buyer? The burden would fall on the remaining partners. But, buying out a separating partner can be an expensive proposition. The agreement should include a plan for financing the buyout to avoid financial hardship that can hamper operations.
  • Grounds for termination of the agreement — If the partner is departing because the business is being poorly run, his or her rights have been violated, or the other partners have changed the mission of the company, the exiting partner should not be held to the terms of the agreement.
  • Spouse or heirs take interest — Sometimes succession planning contemplates the spouse or children will take the decedent’s interest in the company because they want to be involved in the company. However, in most cases neither the remaining company owners nor the heirs want to own the interest. They want or need to sell the corporate shares or membership interest to the company (redemption) or the other owners (cross-purchase) because the family’s estate is the business.

The above provisions can also be included in a comprehensive corporation shareholders agreement or LLC operating agreement. A Phoenix business lawyer at our firm can draft a sound buy-sell agreement to protect your business assets so you can continue operations while dealing with the separation of a partner. The agreement also helps you avoid disputes that lead to protracted, expensive litigation. This preserves the value of your company and the wealth you’ve worked hard to acquire for yourself and your family.

Contact an experienced Phoenix business lawyer to discuss your buy-sell agreement

If you want to protect your company from turmoil when a partner moves on, Law Offices of Donald W. Hudspeth P.C. can help. Our Phoenix business attorneys draft reliable buy-sell agreements for companies throughout Arizona. Call us at 866-696-2033 or contact us online today.

What others are saying about us
  • "I would recommend Mr. Hudspeth unequivocally. Not only is he an outstanding business attorney, he also provided me with access to a divorce attorney. Thanks to his skill, and resources available outside the Phoenix law family, I was successful in challenging a “family law” mediation that was particularly and grossly unfair." - Chandler, Arizona Private Individual

  • "Thank you for the work you have done in creating these documents. It is always a pleasure dealing with this firm!" - J. P.

  • "An excellent response. Masterfully prepared. Thank you." - El Paso, Texas Real Estate Investor

  • "Glad about meeting with Don. Felt so much better, better than in 15 years. Really appreciated the conversation." - RH, Phoenix Manufacturing Company

Donald W. Hudspeth Attorney Photo
Donald W. Hudspeth
Principal Attorney

Attorney Donald W. Hudspeth has more than twenty years’ experience practicing corporate and business law. Before attending law school, Mr. Hudspeth held a stock brokers license at the age of 21 and owned his own business at the age of 23. He was a business law professor at Arizona State University, West Campus, and has conducted classes and seminars for a number of higher institutions and organizations. Mr. Hudspeth has published two books on law and is the founder of the radio programs Law on the Edge and Law Talk.

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Brian K. Stanley
Of Counsel

Attorney Brian K. Stanley has more than thirty years' experience practicing corporate and business law. Brian also worked for Sandra Day O'Connor in 1976-1977; Formerly with the Phoenix firm of Jones, Hunter & Lerch as of the dissolution of that firm in 1979. (Also Member, Law Office of Brian K. Stanley, PLLC).

Janae A. Perry-Meier Attorney Photo
Janae A. Perry-Meier
Associate

Janae Perry-Meier is a business and commercial law attorney focusing on international business. Janae handles both transactional and litigation matters, including: forming your business, drafting your contracts, franchising, business disputes, business divorce, mergers and acquisitions, private placements, securities compliance, and corporate governance. Janae also handles trademark registration, office action responses, and infringement cases.

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Michael David Malin
Associate

Michael Malin has been a practicing attorney in Arizona since 2013. He has represented clients through all stages of litigation. Prior to joining the firm, Michael litigated cases involving professional negligence, insurance bad faith, dram shop liability, personal injury and wrongful death, Indian law, probate, and criminal matters. Before attending law school, he worked for several startup companies in the then-nascent field of smartphone and tablet application development. test

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Laura Underwood
Litigation Paralegal

About Laura Underwood is a Litigation Paralegal whose background includes specialized family law with the Attorney General’s Office as well as some personal injury and trademark law.

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Our firm now offers a scholarship program for ASU first and second year law students.

The scholarship is awarded to students for academic merit with an interest in business and business law. Candidates may have majored in fields other than business, have taken a break between college and law school, or have had exceptional life experiences.

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