Buy/Sell Agreements
A buy/sell agreement obligates one party, the other owners, to purchase a deceased business owner's interest at a certain price and another party, the deceased owner's estate or heirs, to sell the interest at that price.
A buy/sell agreement gives business owners assurance about who will purchase a deceased owner's business interest, what the price will be, when the sale will take place and where the funds will come from.
There are three types of buy/sell agreements. They are the entity purchase buy/sell agreement, the cross purchase buy/sell agreement and the one-way buy/sell agreement.
1. Under an entity type of buy/sell agreement, the business entity agrees to buy the deceased owner's interest.
2. Under a purchase buy/sell agreement, each business owner individually agrees to buy a portion of the deceased's interest.
3. Under a one-way buy/sell agreement, the owner is the sole owner of the business. If a potential buyer can be identified, ideally from among the employees, a special version of the buy/sell agreement used in partnerships can be adapted for the sole-owner situation.