TLDR:
A buy-sell agreement is a legally binding contract between co-owners of a business that governs what happens to an owner’s shares if certain triggering events occur, such as death, disability, divorce, or departure.
Why Buy-Sell Agreements are Critical
Buy-sell agreements prevent ownership disputes that can paralyze a business when a co-owner unexpectedly dies, becomes disabled, divorces, files for bankruptcy, or simply wants to exit. Without a buy-sell agreement, a deceased owner’s shares may pass to heirs who have no interest or ability to run the business, a divorcing owner’s spouse may become a co-owner, or a bankrupt owner’s shares may end up with a creditor.