Buy-Sell

How it Works

A market is created for the business when a partner or owner dies, becomes disabled or leaves the business. This agreement establishes a predetermined business price and a buyer for the business interest. Two frequently used forms of buy-sell agreements are Cross Purchase and Entity Purchase.

Cross Purchase - Surviving business owners purchase the deceased or disabled owner's share of the business from the estate or the owner for an agreed-upon price.

Entity Purchase - The business buys the deceased or disabled owner's interest (also known as a stock redemption plan). The deceased owner's estate or the disabled owner receives an agreed-upon price, with the remaining partners then owning all the business.

Advantages

• Assures a definite price and buyer under mutually agreeable conditions.
• Creates an automatic market for the business interest.
• Assures customer, creditors and employees of business continuity.
• Active owners retain business control.