PART 4 OF 4: Drafting and Maintaining the Agreement

Getting the document right and keeping it current.

A buy-sell agreement is only as good as its drafting and only as useful as it is current. An agreement that is poorly drafted, or that no longer reflects the practice, can fail when invoked. This part addresses how to draft a sound buy-sell and keep it working over time.

Drafting for the specific practice

A buy-sell should be drafted for the particular practice, its owners, and its structure, not adapted from a generic form. The terms must fit the practice's entity, its compliance obligations, and the owners' actual intentions. A template that overlooks these can create ambiguity or unenforceable terms that surface only when the agreement is needed.

Coordinating with other documents

The buy-sell must be consistent with the practice's other governing documents, its entity formation documents, and any related arrangements such as insurance policies and estate plans. Inconsistencies among these creates conflict and uncertainty precisely when clarity is essential.

Compliance considerations

Because these are healthcare practices, the buy-sell must respect California's ownership rules, ensuring that any transfer of interest keeps the practice's ownership lawful. A buyout that would place ownership in ineligible hands, even temporarily, must be structured to avoid that outcome.

Keeping the agreement current

A buy-sell should be reviewed and updated as the practice changes:

• When owners join or leave, or ownership percentages change.
• When the practice's value grows and valuation or funding needs updating.
• When laws affecting ownership or taxation change.
• Periodically, even absent a specific event, to confirm it still fits.

The cost of neglect

An outdated or absent buy-sell is discovered at the worst time, when an owner has died, become disabled, or fallen into dispute. The modest effort of drafting and maintaining a sound agreement is far less costly than the disruption of not having one that works.

How West Coast Health Law Can Help

We draft and maintain buy-sell agreements for California healthcare practices, coordinating them with the practice's other documents and keeping them current and compliant. If your practice has co-owners, we can help you put a sound buy-sell in place!

West Coast Health Law offers a FREE consultation which you may schedule by clicking the button on our website.

This article is provided for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Laws change and every transaction is different; consult a qualified attorney about your specific situation.