Buy-Sell Agreements

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

An insured buy-sell agreement is where insurance is used to fund the buyout.  A life insurance policy is purchased on the participating owner's lives and used to buy out a surviving spouse of the deceased owner.  

A buy-sell agreement consists of several legally binding clauses in a business partnership or operating agreement or a separate, freestanding agreement, and controls the following business decisions:

• Who can buy a departing partner's or shareholder's share of the business (this may include outsiders or be limited to other partners/shareholders);
• What events will trigger a buyout such as death, disability, retirement, or an owner leaving the company and;
• What price will be paid for a partner's or shareholder's interest in the company.

It is important to seek advice when drafting a buy-sell agreement from neutral professionals.  Dugan & Lopatka has the business succession specialists and financial planners you need to ensure the buy-sell arrangement is well-funded and to guarantee there will be money when the buy-sell event is triggered.