What Are Buy-Sell Agreements?

A Video FAQ with Mary E. Vandenack.

Buy-sell agreements are agreements between owners of a business governing the relationship. Typically, they will govern what happens when one of the business owners wants to leave. A buy-sell agreement will cover different types of situations as well. If the owners also work for the business, it will cover what happens when one of the owners decides to discontinue working for the business. Another issue that will be covered is what happens if one of the owners becomes disabled or if one dies while owning the business. An important aspect of the buy-sell agreement is determining the value—so how much is going to be paid out to a business owner that dies or becomes disabled. Another issue is the terms of a buy-out. Is it going to be an issue for the business to figure out how to fund a sudden payment to an owner of the business. Often strategies like life insurance or disability funding for a buy-out are used to assist with that.

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