The time to review your multi-member LLC’s Buy Sell Agreement or Operating Agreement with buy sell provisions is NOW! Do it before a triggering event occurs that will cause a buy out. You don’t want to find out after a triggering event that the Buy Sell Agreement has surprises that could have been avoided with a good review and modification to the Buy Sell Agreement.
Warning #1: If your multi-member LLC does not have a Buy Sell Agreement or buy sell provisions in an Operating Agreement you and the other members are asking for trouble. Read A Multi-Member LLC’s Most Important Document.
Warning #2: If the members of your LLC signed a Buy Sell Agreement or an Operating Agreement that has buy sell provisions do not put it in a drawer and forget about it until a triggering event occurs that starts the buy out process. Buy Sell Agreements need to be reviewed from time to time and updated if necessary.
Mercer Capital’s article discusses a very important topic – when is the best time to review your company’s Buy Sell Agreement?
“most business owners do not have a current understanding of the details and potential pitfalls that lurk within their own buy-sell agreements. Most view these agreements as obligatory legal documents that can be forgotten about until needed. Unfortunately, when a buy-sell agreement is needed it is too late to fix any problems within the agreement.
For the past several years, Chris Mercer, the CEO of Mercer Capital, has used the image of a ticking time-bomb as a metaphor of what might be awaiting some business owners within their buy-sell agreements. Would you ignore an actual bomb that was ticking away in your file cabinet? Of course not, and you should not ignore your buy-sell agreement either.”
If your LLC has a Buy Sell Agreement or an Operating Agreement with buy sell provisions you and the other members must review it from time to time and update it if necessary.
#1 Reason to Review Your Buy Sell Agreement
The most common reason to review a Buy Sell Agreement is to make sure the valuation method works and its gives the members a buy out price they agree on.
Warning #3: Make sure the person who prepared your LLC’s Buy Sell Agreement had the knowledge and skill required to draft a comprehensive state of the art Buy Sell Agreement. This is not a document you want to copy off the internet. Nor do you want the average lawyer to prepare your Buy Sell Agreement because he or she doesn’t know s*** from shineola about Buy Sell Agreements. Most lawyers grab a form from their firm’s form bank and run with it without understanding the many complex issues that arise in every Buy Sell Agreement. Most lawyers who prepare Buy Sell Agreements or Operating Agreements with buy sell provisions do not have the knowledge necessary to prepare a good agreement that will work properly. For more on this issue see “A Test to Determine if Your Buy Sell Agreement Sucks.”
The article explains the Six Things That Should Be Clear in Any Valuation Process Agreement:
- Standard of value
- Level of Value
- The “as of” date
- Qualifications of the appraiser(s)
- Appraisal standards to be followed
- Funding mechanisms
If you are an owner of a valuable business that has multiple owners ask yourself the following questions:
1. Does your company have a Buy Sell Agreement? If not, why not? You and your loved ones could suffer severe adverse economic consequences unless the owners adopt a Buy Sell Agreement.
2. If your company has a Buy Sell Agreement how long has it been since it was reviewed? If your answer is more than one year it is time to review the agreement.
3. Do you understand all of the provisions in the Buy Sell Agreement? If not, you must take the time to understand the entire agreement and modify any language that is a problem.
Hire the Keyts to Prepare a Buy Sell Agreement
We prepare Buy Sell Agreements custom drafted specifically to meet the desires of the members of Arizona LLCs. Our Buy Sell Agreement is the end result of Richard Keyt preparing this type of business agreement many times since practicing law in Arizona since 1980.We have three prices for our custom drafted Buy Sell Agreement. The prices are:
- $897 if we formed the LLC within the last 90 days
- $1,497 if we formed the LLC more than 90 days ago or if we did not form the LLC
- $1,394 if you purchase a Buy Sell Agreement for $897 and a new or amended Operating Agreement for $497.
Here’s the sequence of events when somebody hires us to prepare a Buy Sell Agreement for their Arizona LLC:
1. The purchaser completes and submits our online Buy Sell Agreement Questionnaire.
2. The purchaser pays for the Buy Sell Agreement with a credit card in our secure online store at one of the following links:
a. $897 Buy Sell Agreement Order Form if we formed the LLC within the last 90 days.
b. $1,497 Buy Sell Agreement Order Form if we formed the LLC more than 90 days ago or if we did not form the LLC.
c. $1,394 Buy Sell Agreement & Operating Agreement Order Form if we did not form the LLC and you are purchasing a Buy Sell Agreement and an Operating Agreement.
You can also pay by calling my legal assistant Rachel LeBeau - 480-664-7846 and giving your credit card information over the phone or by sending a check payable to KEYTLaw, LLC, 7373 E. Doubletree Ranch Road, Suite 165, Scottsdale, Arizona 85258.
3. After paying and completing our Questionnaire Richard Keyt will prepare the Buy Sell Agreement within 3 – 5 business days and email it to the LLC’s contact person along with a letter of explanation. These documents are in digital (pdf) format for distribution to all members for their review and input.
4. Members review the Buy Sell Agreement, mark text to be changed and make a list of questions about provisions and additional issues to ask KEYTLaw business and contracts attorney and former CPA Richard C Keyt. The members can email their changes to Richard or call Richard at 480-664-7472 and schedule a phone conference or a conference at our office for Ricky to answer questions about the BSA and determine what changes, if any, the members want to make to the BSA. The BSA comes with one hour of attorney time to discuss the agreement with the members and modify it per the members’ instructions at the meeting. Attorney time incurred beyond one hour will be charged at $295/hour.
5. Richard C. Keyt will revise the Buy Sell Agreement and send it to the contact person as an Adobe pdf file for the signatures of the members. Ricky will also send a pdf version of the agreement that shows the changes we made to the first draft of the BSA.
6. Members can sign the agreement the old fashioned way or we can arrange for digital signatures for no additional cost.
We constantly tell members of multi-member LLCs that the most important company document is the company’s Buy Sell Agreement because it is the only way to plan for the orderly future “divorce” of a member. Without a Buy Sell Agreement, the members are stuck with each other forever unless they are fortunate to agree on who will go, who will stay and how much, if any, the remaining members will pay the selling member.
Our Fee Includes Attorney Consultation & Revision Time
Our fee includes one hour of attorney time conferring with members, modifying the agreement and drafting custom provisions. Few of our LLCs exceed the allotted attorney time to finalize their Buy Sell Agreement. We want the final agreement to contain all of the provisions desired by the members of each LLC. Some LLCs need more custom drafting of provisions for the Operating Agreement or need more conference time with members to discuss the agreement and make changes. We bill the LLC for any excess attorney time at $295 per hour.
How to Hire the Keyts to Form Your New LLC
To hire us to form your Arizona LLC compare the contents of our three LLC packages ($397 Bronze, $597 Silver & $997 Gold [the confidential LLC]) and complete our LLC Formation Questionnaire.