Bankruptcy Frequently Asked Questions

When you pass away or if you decide to step down from your business, business succession can take many forms. Some of the most common succession plans in California involve:

• Selling your shares to another co-owner
• Passing your ownership to a beneficiary
• Selling your ownership to a key employee, outside party, or back to the company

A business contract is meant to outline the expectations and protect the interests of the parties involved in an agreement. The most common elements of a business contract include:

• The identity of the parties: All people or entities legally bound by the terms and conditions of the contract should be defined explicitly.
• The obligations of each party: Commitments that each party makes should be distinct and included in the agreement.
• The rights of each party: If a party can’t fulfill its obligations, what happens? The actions that each party would take in that case should also be clearly documented.

This isn’t necessarily about buying or selling the business. Instead, it’s a formal agreement that defines how and when owners can sell their interests in the company. It provides a plan for scenarios such as when an owner retires, dies, divorces, or goes bankrupt and can also include details about how an outside party may buy into the business.

There are many ways to avoid being liable, but one of the best places to start is by making sure that your business entity is set up correctly by working with a business formation lawyer. You will be less personally liable for the company with an LLC or LLP, but there are still areas where you may be at risk.