Typically, business owners hire a lawyer, their accountant, and sometimes an external valuation professional to develop a purchase-sale agreement. Flaskey says it`s important to talk about what the owners want to achieve with the deal. “Is it about avoiding arguments, getting value, allowing an exit, making sure that someone who is no longer really involved in the company doesn`t get the benefits of other people`s work?” she asks. “The purpose behind this motivates some of these other factors.” When executing a purchase-sale contract, it is important that the company and each owner also receive their own tax advice. Indeed, the agreement can trigger tax obligations of companies and individuals, depending on the personal situation of each individual. Strong family relationships, a shared history, shared values and goals and a number of other ingredients contribute to an effective and strong family business. But predictable and unexpected life events are likely and can have a negative impact on homeowners. Families should not compromise any of their most sacred and important possessions by failing to take the necessary legal steps to protect it. A purchase agreement is essential for companies that want to mitigate certain risks that could ultimately destroy their operations. What is a purchase contract? It is a legal contract between several owners of a business that describes how the property is located in the event of the death of a co-owner or withdrawal from the company.
Despite its name, a purchase agreement does not refer to the purchase or sale of a business. Instead, the agreement establishes when an owner can sell their stake, who can buy the interest, and at what price it can be sold. This formalized business continuity plan should be present in every company with several co-owners. Purchase and sale agreements are designed to help partners handle potentially difficult situations in a way that protects the business and their own personal and family interests. In general, all of these provisions are intended to streamline situations where the SME no longer wants a particular owner to be part of the business, when one owner wishes to sell or when one owner wishes to acquire another`s interest. Whether due to a blockade or simply a voluntary departure, each of these provisions ensures a smooth transition in such a case. As already mentioned, this also prevents unwanted owners from being part of the SME. In addition, a purchase-sale contract may contain a predetermined valuation clause in the event of a triggering event. Some purchase and sale contracts contain a fixed value or formula valuation clauses, while others refer to the use of an independent third party, such as an accountant or business appraiser, to periodically determine the value (e.B. annually).