The New York Law Blog: New York Businesses With Multiple Owners Should Create A Buy-Sell Agreement
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Monday, October 31, 2016

New York Businesses With Multiple Owners Should Create A Buy-Sell Agreement

NY Business Law, Business in NY
When there is more than one owner of a New York business, creating a buy-sell agreement can save time and money when the eventual change in ownership occurs.

New York business owners know that circumstances can change at a moment's notice. That is why ensuring that your business is prepared for whatever waits around the corner is crucial. Part of being fully prepared is having a buy-sell agreement in place.

New York businesses of all forms and sizes with more than one owner should create a solid buy-sell agreement in anticipation of future changes. A buy-sell agreement, also known as a buyout agreement, is a legally binding agreement between co-owners of a business that governs the situation if a co-owner chooses to leave the business, is forced to leave the business or passes away.

Creating buy-sell agreements come with many advantages. First, the cost of creating a buy-sell agreement is small compared to the potential savings in time and money down the road that would be devoted to settling ownership conflicts. Second, a buy-sell agreement stops all infighting among owners before it begins, which keeps the business afloat and its goodwill and customer base intact. Third, the reciprocal nature of  buy-sell agreements affects all owners equally, which makes it easy for all owners to agree to terms. Finally, in the case of inter-generational businesses where ownership is passed within a family, a buy-sell agreement may be tailored to avoid estate taxes and family squabbles.

There are two types of buy-sell agreements. A redemption agreement states that the shares of a former owner can be purchased by the business itself. A cross-purchase agreement allows another owner to purchase the shares individually. Pricing terms can be pre-determined among the owners of your business, or owners can create a formula for valuation.

If drafted by an experienced business attorney, a buy-sell agreement can be surprisingly simple and low-cost when compared to the potential costly problems not having an agreement can cause in the future.
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*Sean Hayes may be contacted at: SeanHayes@ipglegal.com. Sean Hayes is co-chair of the Korea Practice Team and Chair of International Practice Group at IPG Legal.  He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.  Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  He has, also, received the highest rating by AVVO and other legal rating services.

*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.