A buy-sell agreement controls how business ownership interests may be bought, sold, or transferred after specified events.
It is common in closely held companies, partnerships, corporations, and LLCs.
Why a buy-sell agreement matters
Ownership changes can disrupt a business. A buy-sell agreement can address death, disability, retirement, termination, divorce, bankruptcy, deadlock, or voluntary sale.
The agreement may set pricing methods, funding mechanisms, rights of first refusal, mandatory buyouts, and transfer restrictions.
Where a buy-sell agreement appears
Buy-sell agreements appear in small-business planning, shareholder agreements, operating agreements, succession planning, financing, and owner disputes.
They may be standalone contracts or part of an operating agreement or shareholder agreement.
How it differs from nearby terms
A buy-sell agreement addresses ownership transfer rights and buyout events. A capitalization table shows current ownership structure.
An operating agreement governs an LLC more broadly and may include buy-sell provisions.
Practical example
Three owners agree that if one owner dies, the company will buy that owner’s interest using a formula based on recent earnings and life-insurance proceeds.
Related Terms
Quick check
Question: Does a buy-sell agreement plan for ownership transfers after specified events?
Answer: Yes. It controls buyout and transfer rights for business interests.