Buy-Sell Agreement Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Buy-Sell Agreement, written in plain English, along with examples of how it is used.
What is Buy-Sell Agreement?
(n) Buy-Sell Agreement is the agreement between partners of a business entity containing the provision and mode of transferring the shares of one partner to the other.
History and Meaning of Buy-Sell Agreement
A Buy-Sell Agreement, also known as a buyout agreement, is a legal contract between owners of a business that outlines the terms and conditions for the transfer of an owner's interest in the business. Typically, the agreement is triggered by specific events such as death, disability, retirement, or voluntary or involuntary departure of an owner. The agreement can also provide for the transfer of an owner's interest in the event of divorce or bankruptcy.
Buy-Sell Agreements have been in use for many years, and they are commonly used by partnerships, LLCs, and corporations with multiple owners. These agreements can help to ensure that the transfer of ownership is done in a fair and orderly manner that protects the interests of all parties involved.
Examples of Buy-Sell Agreement
Two business partners sign a buy-sell agreement when they form their LLC. The agreement outlines the terms for transferring ownership in the event of death or disability.
A group of shareholders in a corporation create a buy-sell agreement to ensure that the transfer of shares is done in a way that is fair to all parties involved.
An owner of property signs a buy-sell agreement with a potential buyer that outlines the terms for the sale of the property.
Legal Terms Similar to Buy-Sell Agreement
Partnership Agreement - A legal document that outlines the terms of a partnership, including the rights and responsibilities of each partner.
Shareholder Agreement - A legal document that outlines the rights and responsibilities of shareholders in a corporation.
Operating Agreement - A legal document that outlines the terms of an LLC, including the rights and responsibilities of each member.