MAKE THE RIGHT MOVE AND DO NOT USE FREE TEMPLATES FOR PARTNERSHIP AGREEMENTS
Reasons Not to Use a Free Contract Form
We have consulted with many attorney’s over the years about some of our business client’s using buy sell templates they found online to compose the legal documentation for their partnership buy sell agreements. While it is true there’s an inherent bias here that the keenly observant will quickly identify, there were many impartial attorney responses based upon the disastrous results they’ve seen their clients experience before seeking their legal advice.
Below are 6 reasons why you should work with an insurance company that has long term estate planning attorney relationships:
- Selecting the Wrong Form
Many fail to realize how nuanced the law truly is and not understanding this can be detremental. A template can rarely grasp the unique aspects relevant to your businesses succession planning needs. The inexperienced will often choose a form template for their succession plan, but many times they end up selecting the wrong form.
Choosing the wrong form can be one of the single biggest desasters and lead to many legal externalities you definitely do not want to deal with!
- Overlooking the Opportunity for Arbitration
Business owners should consider their potential remedies if an agreement goes sour. Most business owners prefer going through arbitration as opossed to full blown court litigation as fees are much lower. With that said, paying an attorney to implement a custom arbitration clause which follows relevant state and federal law means that such a clause will hold weight if a legal event is triggered.
- Not Considering for How State Laws and Regulations Truly Differ
In my own experience, I have found that some states have laws requiring specific language in business forms and leaving out this language can result in negative consiquences to a business.
Failing to check your state’s specific language requirements for documents can cause them to be rejected, or a just as detremental result, have you accept requirements that you could have avoided by writing specific language.
- Not Knowing What You Don’t Know
One of the most straightforward concerns of why using a boilerplate contract is dangerous is because you don’t know what you don’t know! Unless you are an estate planning attorney, how do you even know what you are choosing.
As we mentioned above, the law is nuanced and lawyers understand the intracacies specific to various situations.
- Leaving out Crucial Language
Many of the most commonly used boilerplate buy sell forms fail to include required language about debt collection and have ambiguous statements relating to debt, backed rent, etc.
The cost of the delay caused by the bad paperwork has always exceeded the cost of hiring a lawyer to do it right the first time. Remember, measure twice, cut once and use the correct tool when cutting.
- And Most Obviously, Not Tailoring the Contract to Your Specific Situation
We have found through these conversations with attorneys, that one of the biggest problems with using free templates is that these agreements fail to address legal issues unique to the particular transaction in question.
Your triggering event that causes a buy sell agreement to activate and direct certain things to occur, whether it is a key person leaving, a death of a partner or a disability of a partner, may have their own specific needs, clauses and nuances.