Do You Need a Lawyer to Draft a Service Agreement?
If you provide services—whether you’re a freelancer, consultant, or agency—chances are you’ve either used or signed a service agreement. And you may...
2 min read
If you own a business with partners, you’ve probably heard of a buy-sell agreement—sometimes called a "business prenup." Simply put, a buy-sell agreement outlines how ownership interests can be transferred in certain situations like retirement, death, disability, or disputes among business owners. It’s a proactive way to keep your business running smoothly, even if unexpected events occur.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
But here's the big question: Do you really need a lawyer to create your buy-sell agreement, or can you do it yourself?
In this post, we'll break down exactly when you might safely draft your own buy-sell agreement, and when hiring an attorney is crucial. By the end, you’ll have a clear sense of which path makes sense for your business.
What Exactly Is a Buy-Sell Agreement?
A buy-sell agreement is a legally binding contract between co-owners of a business, detailing how ownership interests will be handled if certain events occur. These events typically include retirement, disability, divorce, death, or disagreements among owners.
Think of it as a safety net: If something unexpected happens, your business already has a clear plan in place, protecting the company's stability and each owner's financial interests.
Example – Co-Owners Planning for the Future
Imagine two entrepreneurs—Sarah and Tom—who run a thriving online marketing agency. Both have equal ownership, and they decide it’s smart to have a plan in case either of them wants to retire or faces unforeseen circumstances, such as serious illness or even death.
By setting up a buy-sell agreement, they clearly outline terms such as:
- How each owner's share will be valued.
- How the other partner or the business itself can buy out the exiting partner’s interest.
- Timelines and payment terms.
Now, if Tom unexpectedly decides to retire or becomes unable to participate in the business, there's no confusion or disagreement. The terms are already clearly laid out.
When You Might Not Need a Lawyer (DIY Approach)
For straightforward business scenarios, drafting your own buy-sell agreement can sometimes make sense—especially if you're running a small business with a simple ownership structure and minimal complexity.
Consider the DIY approach if your business scenario fits into these categories:
- Few business owners: Usually two or three co-owners, all aligned on major business decisions.
- Simple valuation methods: Agreeing upfront on a clear method for valuing the company, such as a multiple of revenue or profits.
- Using standard, reputable templates: Availability of quality, state-specific templates that cover your basic needs.
Example – Small LLC with Straightforward Terms
Let’s say Mark and Lisa co-own a small consulting LLC. They equally split ownership and agree that if either of them wants to leave, the business will be valued at exactly two times the previous year's revenue. Since their terms are simple and clear, they can confidently use a reliable buy-sell agreement template, tweaking just a few clauses to fit their specific scenario.
Pro Tip – Leveraging Reliable Templates
If you're considering the DIY route, the single most important step is choosing a credible buy-sell agreement template.
- Look for state-specific templates from reputable legal resource providers like Legal GPS.
- Ensure clarity and completeness by choosing templates that include detailed instructions and clear explanations of all key clauses.
Always double-check your state's legal requirements to ensure your agreement will hold up if challenged.
Legal GPS Pro
Protect your business with our complete legal subscription service, designed by top startup attorneys.
- ✅ Complete Legal Toolkit
- ✅ 100+ Editable Contracts
- ✅ Affordable Legal Guidance
- ✅ Custom Legal Status Report
Do You Need a Lawyer to Raise Investment for Your Business?
Raising money for your business is exciting—and often overwhelming. Whether it’s a $10K check from your uncle or a $250K convertible note from an...
Can You Form a Corporation Without a Lawyer?
If you’ve ever Googled “how to start a corporation,” you’ve probably run into two extremes. One side says you absolutely must hire a lawyer or risk...