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-What is going on, guys. My name is Daniel McKenna. I'm the executive producer here at Thrive15, the website that provides business owners with training on time management ,marketing, branind, pr and more, and I recently named my TV remote Waldo for obvious reasons. But today we are sitting down with Clay Clark and with super attorney, Wes Carter, and we are talking about the buy and sell agreements. If you don't know who Wes Carter is, time to get educated. Check this out.
Now you know a little bit more about Wes Carter. Today we are talking about the buy and sell agreements. What does that mean for you? Well, listen, if you're going to have a long-term business, a lot of crazy things could and maybe will happen. You might have somebody get divorced or maybe someone dies in the business, or someone just wants to get out and wants to sell the business. You need to have some rules beforehand so when those situations come up, it's not a crazy deal. Some rules you're going to play by when anything does happen later on down the line. Super attorney, Wes Carter is going to show you what these buy and sell agreements are all about.
Here at Thrive we fully believe that knowledge without application is meaningless. Meaning, if you don't take something from what you learned today and then actually apply it to your life or your business, today's lesson is going to be more meaningless than requiring NSA employees to read the Constitution. Burn! Boom!
-Wes Carter, how are you my friend?
-I'm well, how are you?
-I'm doing great. Last night I slept for five hours, which pushed past the four hours I'm used to. So I feel like I have that much more energy.
-20% more power. I'm not going to test it. Let's just--
-It's way more than you need, right?
-It's beautiful. Beautiful. And then also we're joined here by our unofficial non-sponsor, Perrier. We've never called them. We've never reached out to them to sponsor us, but we believe that in the future if we put enough Perrier in each episode they'll eventually sponsor us.
-Nice. There could be legal issue with that.
-Yep. Could be legal issues with it, and that's why we're going to be talking today with the legal eagle, Mr. Wes Carter about buy and sell agreements.
-And today, Wes, before we get down into the nitty gritty here. I want to ask you the question, I think Thrivers throughout the world, other countries, continents, cities, rural communities, they want to know, are you in any way, shape or form legally related to stay Stacy Lee Carter, better known as Miss Kitty or the Cat, an American former professional wrestling-- you know, she's sort of a big deal, kind of a wrestling diva?
-OK. And if he's going to be that way, we just are going to move on. And so now we're talking about buy and sell agreements. And I'm going to go ahead define it for you.
-It says a buy and sell agreement is an approach used by sole proprietorships, partnerships, and close corporations to divide the business share or interest of a proprietor, partner, or shareholder. The owner of the business interest being considered has to be disabled, deceased, retired, or expressed interest in selling. The buy and sell agreement requires that the business share is sold according to a predetermined formula to the company or remaining members of the business. Before the interest of the deceased partner can be sold to the company or remaining partners, the deceased estate must agree to sell. Wes, what does that mean in common sense?
-That was a lot of big words there.
-Yeah, what does this mean? What is a buy and sell agreement?
-It's pretty much like a pre-nup for a business. We're going to agree, going in, if we split up for any reason, here's how we are going to distribute our assets.
-Now, for a lot of Thrivers watching this, I'm sure as you're starting your new company right now, or maybe you have one-- maybe you and a partner are cheating the system, you're trying to screw the man, which would be me. And you said, we're going to share an account. So the two of you have one account. You're watching this video together. I know it can be awkward, but the thing is, nobody starts a business, I believe, with the idea that they're going to have a failed partnership.
-But yet, you're saying-- are you saying we should have one of these business pre-nups before we start?
-You should, absolutely. They should be one of the first things you do.
-If you're talk about, like you mentioned, your partner dies, your partner is disabled, your partner has a personal bankruptcy, your partner gets divorced.
-Those are all things that will significantly affect the business, and you could end up in business with a bankruptcy trustee or an ex-wife if you're not careful.
-Now what is the most common misconception that people have about a buy and sell agreement?
-Probably the most common misconception I would say is that you don't need one. That we'll figure it out. If you want to sell it, we'll just agree later on. Or if we get to the point where we want to sell the business, nobody thinks about, well what if only one of us wants to sell and the other one doesn't. Just, we'll figure it out later.
-Well, here's the thing. I'm not talking about me necessarily. I might be. But I'm talking about a guy I know, right. A guy I know. That way I don't get myself in legal trouble. It's a guy I know. Could be me, could be a guy I know. We don't know. But the guy I know has partnered with a lot of different people and sometimes people, they do weird stuff. They get divorced. They get into tax issues. They do bad things. People get sick. People get hurt. I mean, no plans on it, but it happens, right? I mean, this is pretty common stuff here.
-OK. So I'm going to ask you this. This is kind of a story time with Wes Carter. Wes, go ahead and tell me a horrible story about what can happen if you're a business-- say you're a business owner-- you and a partner own a business together and you don't have a buy and sell agreement in place. I mean, what's the worst thing that could happen? Give me kind of a story. What could happen?
-Probably worst case scenario is your partner is involved in a bankruptcy and a divorce at the same time. Because then you have a bankruptcy trustee coming in to try to regulate the business' assets to pay its creditors, pay your partners creditors. At the same time you have a wife and a husband who are trying to split up their marital property, part of which is his interest in the business, deciding who gets the money, who gets to make management decisions. I mean, and you're just sitting there trying to run your
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-Now, if you're watching this right now, hopefully you're one of those Thrivers who's decided to be proactive. And so you are watching this video before you find yourself in the funk.
-But Wes, let's say that I'm in the funk.
-You're in the funk.
-I'm in the funk like James Brown. I'm in the funk like Parliament. I'm in the funk like Bill Clinton-- like George Clinton. Bill Clinton did play the saxophone so he also brought the funk.
-Little funk there.
-But if I'm in the funk and I find myself partnering with a guy who's going through a divorce, he's going through some financial issues, a bankruptcy, what can I do without a buy-sell agreement?
-You guys can always mutually agree to do something depending on how far along it is in the process. If a divorce judge or a bankruptcy trustee's already tried to tie something to that business interest, it's a little too late. But if you're just getting into the funk, then you can always try to go ahead and mutually agree and get one done real quick. Otherwise, it's going to be a matter of probably just default state law issues, where you're just going to have to have an attorney tell you what the default rules are in the state and you're stuck.
-Well, with that inspirational story, I'm going to crack open a Perrier here, real quick here.
-Yeah. Would you like a Perrier?
-I'll pass, thank you.
-You know, this thing has no calories and I think no flavor. It's an amazing deal. I don't know. I thought forever, how do they--
-There goes that sponsorship.
-Well, I mean if you prefer flavor neutrality, legally speaking, this is the beverage for you, but OK. So now we're moving here into this question I have for you.
-And again we're not going to quote you as far as a specific stat. I just want to know, in general, if say you meet with 10 business owners, what percentage of them, in your mind, have a buy-sell agreement in place?
-I would say maybe half have one.
-So if you're watching this, if it's not you, it's somebody you know. And if you're sharing an account with somebody, somebody in that room is definitely not having a buy-sell agreement in place. Right?
-I know in the world of small business we've got a lot of things we're doing, a lot of hats we're wearing, and one of the last things we think about is things that aren't happening right now.
-The things that happen in the future, sometimes you do a poor job of planning. But if you had to stress, on a scale of 1 to 10, 10 being the most important thing in the world, 1 being it doesn't matter, how important is it to have a buy-sell agreement in place?
-I'd say 10.
-Yes. Because like we talked about, once something happens and you're in the funk, it's a little too late.
-If you're in the funk, I want you to ask yourself this question. Here we go, we're going to ask ourselves this question. If you're in the funk, if you're out of the funk, either way, ask yourself this question. What are some of the tough questions, Wes? What are some of these questions that we should be asking? Tell the Thrivers. What is the question they should be asking themselves?
-I mean, you should not have a question, do I need one? You need one. Then the questions you have to ask are, who can buy it? Are you going to limit it to who can-- can your partner go out and sell it to anybody? How much are we going to buy it for? How do we figure out when we get to that point?
-Who can buy it?
BOTH: How much?
WES: I think are the two big ones.
-And how much should it cost if I want to make one of these buy-sell agreements right now? I'm going, OK. I'm tired of all this funk. I'm not going to have Parliament, George Clinton, and all the James Brown in my office. No funk. I'm going to go ahead and just take action. How much is it going to cost me?
-I'd say you start out around 500-750 and go up from there, depending on how big your business is, how complicated it is.
-And in my shameless attempt to just make sure that we're not slamming other attorneys, we're not praising a particular attorney, but there's attorneys of all scopes. Good attorneys, bad attorneys out there.
-You're recommending find a reputable attorney with some references, make sure you find a good attorney?
-Right. We always recommend ask around. Find someone who's happy with their attorney around in your area. Or call an attorney that you know represents a business that you like.
-What if I know a guy? What if I say I know a guy? He's not an attorney, but he went to law school for a while. He went on to legalzoom.com, he downloaded a-- nothing wrong with legalzoom.com. He went on to a [GIBBERISH] dot com. He goes on there, he found a template. Can we just do that?
-No. Every situation's a little different. Every state's got different laws so it's important to find either someone who practices in multiple states or a good attorney in your state.
-So if I know a guy who knows a guy named Vinny, I shouldn't do that.
-You should probably stay away from Vinnys unless they have a law degree.
-OK. Wes, I appreciate you talking about buy-sell agreements, allowing me to talk about Perrier. And for anybody who's watching this episode right now, apparently if you go on to this Perrier website, you have a chance to stay in a beach house in Miami. So that's pretty great. So despite the flavor neutrality, that's a great value.
-Well, Wes as always I just want to remind you that I'll see you later.
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