Denver Shareholder Agreement Lawyer
A buy/sell agreement is a critical component of a business partnership. In the event that one of the shareholders dies, resigns from the business, gets a divorce, becomes disabled, or is forced out of the company, the buy/sell agreement ensures a smooth transition and protects the future of the business.
At Brady, McFarland & Lord, LLC, we help business owners create comprehensive buy/sell agreements that protect their interests. As a business owner herself, Karen L. Brady’s deep knowledge of the law and business planning and succession benefits her clients. For more than 21 years, our firm has served clients in the Greater Denver, JeffCo, and Front Range areas with their ongoing business needs. To schedule a free consultation, contact our shareholder agreement lawyers online or call us at (303) 420-2863.
Why You Need a Denver Shareholder Agreement Attorney
Anytime you own a business, it’s wise to make plans for the future of the company in the event that you or one of the other owners becomes incapacitated, decides to retire, or passes away. If there’s not an agreement in place, disputes are much more common and the future of the business will be much less certain. Having a good owner/shareholder agreement in place can prevent costly lawsuits as well. Anytime you need essential documents or agreements drawn up, it can be tempting to try to do it yourself to save money. However, if the contracts aren’t executed properly, it’s going to be more stressful, time-consuming, and costly in the future than if you had hired a lawyer to handle it initially.
Planning for Success In Your Business
A buy/sell agreement states how a shareholder’s stake in your business will be handled should he or she have a triggering event such as death, retirement, resignation, divorce, or a disability. It also should specify a plan for the valuation of the business. Your shareholder agreement can be structured in a variety of ways, which include:
A Cross-Purchase Agreement
The business owners agree to purchase the deceased’s or withdrawing the shareholder’s share of the business. When executing a cross-purchase agreement, it usually includes information about how the shares will be divided or purchased by the other remaining partners of the business. The primary purpose of this type of agreement is to allow a company’s partners or other stakeholders to coordinate the continuance of the business in the event that the owner becomes incapacitated or passes away.
It’s common for each business owner to agree to purchase life insurance on each other, and then when one of them passes away, the other can use the death benefit to buy the deceased owner’s shares. The agreements sometimes include a set price for buying out a partner who is retiring. Since the value of the business can change from year to year, it’s crucial to have a qualified attorney review your agreements regularly and make any necessary changes.
Another issue to consider when having your attorney draw up a cross-purchase agreement is the valuation of the company. If there is more than one owner, both owners will need to come to an agreement about the valuation. Calculating an appropriate valuation can make it simple down the road if one partner decides to buy out the other.
An Equity Redemption Agreement
In an equity redemption agreement, the business is obligated to repurchase the equity of the shareholder with the triggering event. A triggering event could be the owner passing away or deciding to retire. The agreement is between the owner and the company itself. This type of agreement generally includes information about who can purchase or take control of the departing owners’ interest and the price required for the purchase. By specifying this information in an agreement before the triggering event happens, a crisis can be avoided due to the proper agreements being in place.
Key Man Insurance
When one owner is so much more critical to the successful operation of the business than anyone else, it is often important to draw up a Key Man Insurance Policy. An experienced shareholder agreement attorney will advise on the correct stipulations in this type of policy. This ensures that in the case of a tragedy, such as the loss of the key person in the business, the remaining owners are able to continue operating the business going forward.
A Wait-And-See Agreement
This is the most flexible of the agreements. In a wait-and-see agreement, shareholders wait until a triggering event and determine at that time how to act. With this type of agreement, there is no decision made about who will purchase the departing owner’s interest or at what price. Often, a wait-and-see agreement will have a clause that gives the remaining business owners the first option to buy the departing owner’s interest. If the company doesn’t act on this, any other remaining owners will have the opportunity to purchase the departing owner’s interest. However, any of the departing owner’s interests that the other owners do not purchase must then be purchased by the company.
Let Our Denver Shareholder Agreement Attorneys Help You
Our Denver shareholder agreement attorney will meet with you to understand your business objectives and concerns. With these considerations in mind, we will create a buy/sell agreement that is tailored to your unique situation. We are committed to helping you create an agreement that minimizes or eliminates the need for costly and time-consuming litigation. Whether you have just started your business or you have been in partnership for several years, we can help you protect your business with a buy/sell agreement. Contact our Denver business planning lawyers online or call us at (303) 420-2863 to schedule a free consultation.