Buy-Sell Agreements

A buy-sell agreement is a legally-binding agreement that prepares for the future sale of a business or the purchase of a co-owners interest in the event a number of different situations including, if one co-owner dies, is forced to leave the business, or chooses to leave.

The three types of buy-sell agreements are:

Entity Buy-Sell

The business enters into a written agreement with the owners to purchase the interest of each owner in the event of disability, death, divorce or departure of a co-owner.

Cross-Purchase Buy-Sell Agreement

Individual owners agree to purchase the interest of other owners. Each individual is the owner and beneficiary of a life insurance policy on each of the other owners, and the policy proceeds are used to pay the purchase price.

Partnership Administration Succession Strategy (PASS)

Individual owners for a separate partnership and the partnership acquire life insurance policies on all the owner and administers the provisions of the buy-sell agreement. This approach has numerous tax and financial advantages compared to traditional stock redemption or cross-purchase agreements particularly in the case of C or S corporations with more than two owners.

View our buy-sell agreement comparison chart.

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