Buy Sell Agreements for Closely Held Businesses

What Is a Buy Sell Agreement?

A buy sell agreement is a contract among business owners that controls how ownership
interests may be transferred upon specific triggering events.
These agreements are designed to prevent deadlock, protect valuation expectations,
and restrict transfers to unwanted third parties.

Common Buy Sell Triggering Events

Buy sell agreements typically address ownership transfers following retirement,
voluntary sale, disability, death, divorce, bankruptcy, or expulsion of an owner.
Clearly defined triggers reduce uncertainty and avoid disputes during transitions.

Valuation Methods and Purchase Mechanics

Effective buy sell agreements define how ownership interests are valued and purchased.
This may include fixed price formulas, appraisal mechanisms, funding methods,
installment terms, and insurance backed purchases.

Coordination with Succession and Estate Planning

Buy sell agreements should be coordinated with broader succession and estate planning.
When an owner exits due to death or incapacity, business agreements must align with
estate documents to avoid conflict and unintended ownership outcomes.
Learn more about business succession planning.

Is a buy sell agreement required by law?

No. However, without a buy sell agreement, ownership transfers are governed by default law,
which often leads to disputes, valuation uncertainty, or unintended owners.

Can a buy sell agreement override a will?

Yes. Business agreements often control ownership transfers regardless of what a will provides.
This is why coordination between business documents and estate planning is critical.

When should a buy sell agreement be updated?

Buy sell agreements should be reviewed after ownership changes, valuation shifts,
financing events, or major life events affecting owners.