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What is a Buy Sell Agreement?

Business partnerships end for a wide number of reasons. Sometimes there is a misalignment of goals, or one partner is at a different life stage, or one partner wants to sell and the other wants to keep the business operating as it is. In any event, when it’s time to buy out your business partner there are a number of legal intricacies that must be handled well if you are to achieve a successful business partnership buyout.

Whatever the reason is, if you want to keep your business, but not your partner, there is a right way to do it: A Buy-Sell Agreement.

A buy–sell agreement, also known as a buyout agreement, is a legally binding agreement between co-owners of a business that governs the situation if a co-owner dies or is otherwise forced to leave the business, or chooses to leave the business.

The buy-sell agreement usually provides for the purchase and sale of ownership interests in the business at a price determined in accordance with the agreement.

The document consists of several legally binding clauses and controls the following business decisions:

  • Who is selling and who is buying;
  • What is being sold/bought;
  • Which price is being paid;
  • Where the transaction is taken place;
  • When it is going to happen;
  • How the transition is going to be;
  • and so on.

A Buy-Sell agreement can also be used to add a new partner.