Ownership and transitions
Buy-sell agreement
A contract that sets the terms for an owner's exit and requires that owner's share to be sold to the business or the remaining owners.
A buy-sell agreement controls what happens to an owner's share when that owner leaves or dies. Cornell's legal reference explains that such agreements require the shares to be resold to the organization or to current partners when the owner decides to leave or passes away.
The owners agree on the rules in advance. Many owners also use these agreements to control who may join the business. A buy-sell agreement often sits beside a partnership agreement and connects to succession planning.
Price formulas, funding and tax effects vary. An attorney and a CPA should review the details before owners sign. This entry gives a general definition and no advice on terms.