"Buy-Sell Agreement Template"

What Is a Buy-Sell Agreement?

A Buy-Sell Agreement is a legally binding document that ensures that a business or a fraction of the business gets redistributed in the event that the business owner becomes unfit to run the business for specific reasons, mainly associated with death. Planning such an agreement ensures that the business has a clear strategy and plan of what to do if such an event occurs. In the absence of such an agreement, a business can face multiple issues regarding finances and legal questions.

Alternate Names:

  • Buy and Sell Agreement;
  • Buyout Agreement.

The main purpose of such an agreement prevents new business partners from being added to a company that may not know, understand, or care about the business - which could have obvious catastrophic effects on a business. Imagine a situation where a business partner passes away and their share of the business is inherited by one of their relatives. The agreement ensures that standard business operating tasks will still be carried out as planned.

A Buy-Sell Agreement template can be downloaded by clicking the link below.

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How Does a Buy-Sell Agreement Work?

A Buy-Sell Agreement sets out clear and concise steps regarding the passage of business ownership from the old business owner to the new owner. This usually occurs during the death of the business owner or if they decide to sell and retire from the company. In general, the outstanding share of the business will be sold to various individuals within the business.

Having such an agreement in place ensures that there is a clear strategy with previously agreed conditions regarding the sale of a business. It also outlines a fair price of shares. These factors will help prevent any potential conflicts if an owner wants to sell their share, as all of these details will be previously discussed and agreed upon in the agreement.

How Much Does a Buy-Sell Agreement Cost?

It would be difficult to put a definite price on the Buy-Sell Agreement as the overall price is dependent upon several factors mainly relating to the size of the business, the business structure and the level of intricacy required when forming the agreement. The costs are paid directly from the business to a lawyer that will often charge for:

  • Consultations;
  • Drafting of the agreement (costs for this vary between $700-$800 depending on the State);
  • Reviewing the agreement (costs for this average between $1200-$1300 depending on the State);
  • Potentially resolving any problems that arise as a result of the agreement.

If hired on an hourly basis, it could cost anything between $350-$450 per hour depending on the State. Although it may seem rather pricey to finalize all the details of the agreement, it will actually save you more cash in the long run if you can prove that you have a specific plan in place, should it need to be implemented.

How to Write a Buy-Sell Agreement?

Although this would depend on the specific type of agreement, a simple Buy-Sell Agreement will always contain information regarding the valuation, the conditions of the agreement, and information regarding tax complications that could occur. If you want to draft a Buy-Sell Agreement individually, ensure that you take the following tips into account:

  • The earlier the better. The earlier this agreement is agreed upon, drafted up, and signed - the better. This will prevent any potential emotional outbursts if done beforehand.
  • Draft up the conditions. These conditions should cover two main things. The first of these is a clear strategy for the direction of the business should a successor come along. That way, they will know exactly what can and should be done. The second condition should outline a list of events that could cause the agreement to be triggered.
  • Ensure all business partners have life insurance coverage for one another which will allow a business partner to successfully buy out their partner by ensuring that they have the necessary finances for this.
  • Include the valuation of the business. This is crucial as it values the shares a partner holds should they decide to sell.
  • Consider any tax complications that could arise, particularly those associated with estate taxes otherwise you could potentially be left with a lot less money than you would have initially hoped.

What Is a Cross-Purchase Buy-Sell Agreement?

A Cross-Purchase Buy-Sell Agreement is used when the shares of a partner are bought out by other business partners in events that are agreed upon in the agreement. Usually, this covers retirement, the sale of shares, or death. Usually, the shares can be of high value and the various partners may not have sufficient funds to buy out the shares immediately. This is why it is critical to take out life insurance coverage as these costs will help cover the costs associated with purchasing the shares of a former partner.


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Buy-Sell Agreement
This Buy-Sell Agreement (hereinafter referred to as the “Agreement”) is entered into as
of ________________ (hereinafter referred to as the “Effective Date”), by and between
______________________________, with a mailing address of ____________________
________________________________________________________________________
__________________________________ (hereinafter referred to as the “Company”) and
each of the individuals listed on Schedule A attached hereto (each referred to as the
“Shareholder” and collectively referred to as the “Shareholders”).
Article 1
Purpose
1. Shares. The Shareholders own all of the outstanding shares of the Company
(hereinafter referred to as the “Shares”) in the amounts outlined in Schedule A.
2. Purpose. The Shareholders have entered into this agreement to: (Check all that apply)
Restrict the transfer of the Shares by Shareholders.
Ensure any sale of the Shares is in accordance with established procedures.
Provide stability and continuity in the management of the Company.
Maintain ownership or control of the Company.
Create a market for Shareholders to sell Shares.
Determine how Shares will be transferred in the event of a death, disability, or
other involuntary transfer of Shares.
Set an estate tax value for a deceased Shareholder’s Shares.
Establish an accepted purchase price for Shares.
Other: ____________________________________________________________.
Article 2
Restrictions on Transfer
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Buy-Sell Agreement
This Buy-Sell Agreement (hereinafter referred to as the “Agreement”) is entered into as
of ________________ (hereinafter referred to as the “Effective Date”), by and between
______________________________, with a mailing address of ____________________
________________________________________________________________________
__________________________________ (hereinafter referred to as the “Company”) and
each of the individuals listed on Schedule A attached hereto (each referred to as the
“Shareholder” and collectively referred to as the “Shareholders”).
Article 1
Purpose
1. Shares. The Shareholders own all of the outstanding shares of the Company
(hereinafter referred to as the “Shares”) in the amounts outlined in Schedule A.
2. Purpose. The Shareholders have entered into this agreement to: (Check all that apply)
Restrict the transfer of the Shares by Shareholders.
Ensure any sale of the Shares is in accordance with established procedures.
Provide stability and continuity in the management of the Company.
Maintain ownership or control of the Company.
Create a market for Shareholders to sell Shares.
Determine how Shares will be transferred in the event of a death, disability, or
other involuntary transfer of Shares.
Set an estate tax value for a deceased Shareholder’s Shares.
Establish an accepted purchase price for Shares.
Other: ____________________________________________________________.
Article 2
Restrictions on Transfer
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1. Restriction on Transfer. Except as permitted in this Agreement, the parties will not
sell, transfer, pledge, assign, hypothecate, encumber or alienate (hereinafter referred to as
the “Transfer”) any of the Shares. Any Transfer not in accordance with this Agreement
shall be void.
2. Certificates. (Check one)
Not applicable.
All certificates representing the Shares now owned or hereafter acquired by each
Shareholder shall have the following legend conspicuously printed on its face:
“The shares represented by this certificate are subject to certain restrictions
contained in a Buy-Sell Agreement among the Company and the Shareholders. A
copy of the Buy-Sell Agreement is on file at the principal office of the Company.”
Article 3
Voluntary Transfers
1. Permitted Transfers. (Check one)
The Shareholders shall not be allowed to Transfer any Shares except as provided
in this Agreement.
The Shareholders shall be allowed to Transfer Shares: (Check all that apply)
Transfers to other shareholders.
Transfers to a revocable trust.
Transfers to the shareholder’s immediate family.
Other: ______________________________________________________.
Any permitted transferee shall hold the Shares subject to the provisions of
this Agreement.
2. Notice of Transfer. In the event a Shareholder wishes to sell any Shares (hereinafter
referred to as the “Offering Shareholder”) other than pursuant to a permitted transfer as
described above (if any), the Shareholder shall provide a written notice to: (Check one)
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The other Shareholders (hereinafter referred to as the “Remaining Shareholders”).
The other Shareholders (Remaining Shareholders) first and then the Company.
The Company.
The Company first and then the other Shareholders (Remaining Shareholders).
of its intention to sell the Shares (hereinafter referred to as the “Notice of Transfer”). A
Notice of Transfer shall specify the following:
● The name and address of the purchaser (hereinafter referred to as the “Third Party
Purchaser”).
● The number of shares being sold (hereinafter referred to as the “Offered Shares”).
● The price per share.
● The payment and other terms of the proposed sale.
3. Transfer of Shares. (Check one)
(Select if written notice is provided to the Remaining Shareholders only).
For __________ days after receipt of a Notice to Transfer, the Remaining Shareholders
shall have the option to purchase the Offered Shares at the price and in accordance to the
terms in the Notice to Transfer in proportion to their respective ownership interests of the
outstanding Shares. If any Remaining Shareholder fails to give timely notice or declines
to purchase its proportionate share, the other Remaining Shareholders shall have the
option to purchase that Remaining Shareholder’s proportionate share of the Offered
Shares, in proportion to their respective ownership interests of the outstanding Shares. If
the Remaining Shareholders elect to purchase less than all of the Offered Shares, the
Offering Shareholder may sell (Check one)
The Offered Shares to the Third Party Purchaser at the price and in
accordance to the terms in the Notice to Transfer
Any Offered Shares not purchased by the Remaining Shareholders to the
Third Party Purchaser at the price and in accordance to the terms in the
Notice to Transfer.
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(Select if written notice is provided to the Remaining Shareholders first and then
the Company).
For __________ days after receipt of a Notice to Transfer, the Remaining Shareholders
shall have the option to purchase the Offered Shares at the price and in accordance with
the terms in the Notice to Transfer in proportion to their respective ownership interests of
the outstanding Shares. If any Remaining Shareholder fails to give timely notice or
declines to purchase its proportionate share, the other Remaining Shareholders shall have
the option to purchase that Remaining Shareholder’s proportionate share of the Offered
Shares, in proportion to their respective ownership interests of the outstanding Shares. At
the end of the __________-day option period, the Remaining Shareholders shall notify
the Company of the number of Offered Shares they intend to purchase. For __________
days after receipt of such notification, the Company shall have the option to purchase any
Offered Shares not being purchased by the Remaining Shareholders at the price and in
accordance to the terms in the Notice to Transfer. If the Remaining Shareholders and/or
the Company elect to purchase less than all of the Offered Shares, the Offering
Shareholder may sell (Check one)
The Offered Shares to the Third Party Purchaser at the price and in
accordance with the terms in the Notice to Transfer.
Any Offered Shares not purchased by the Remaining Shareholders and/or
the Company to the Third Party Purchaser at the price and in accordance to
the terms in the Notice to Transfer.
(Select if written notice is provided to the Company only).
For __________ days after receipt of a Notice to Transfer, the Company shall have the
option to purchase the Offered Shares at the price and in accordance to the terms in the
Notice to Transfer. If the Company elects to purchase less than all of the Offered Shares,
the Offering Shareholder may sell (Check one)
The Offered Shares to the Third Party Purchaser at the price and in
accordance to the terms in the Notice to Transfer.
Any Offered Shares not purchased by the Company to the Third Party
Purchaser at the price and in accordance to the terms in the Notice to
Transfer.
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(Select if written notice is provided to the Company first and then the Remaining
Shareholders).
For __________ days after receipt of a Notice to Transfer, the Company shall have the
option to purchase the Offered Shares at the price and in accordance with the terms in the
Notice to Transfer. At the end of the __________-day option period, if the Company has
elected to purchase less than all of the Offered Shares, it shall notify the Remaining
Shareholders of the number of Offered Shares remaining available for purchase. For
__________ days after receipt of such notification, the Remaining Shareholders shall
have the option to purchase any Offered Shares not being purchased by the Company at
the price and in accordance to the terms in the Notice to Transfer in proportion to their
respective ownership interests of the outstanding Shares. If the Company and/or the
Remaining Shareholders elect to purchase less than all of the Offered Shares, the Offering
Shareholder may sell (Check one)
The Offered Shares to the Third Party Purchaser at the price and in accordance
with the terms in the Notice to Transfer
Any Offered Shares not purchased by the Company and/or the Remaining
Shareholders to the Third Party Purchaser at the price and in accordance to the
terms in the Notice to Transfer.
4. Duties of Transferees. Unless otherwise provided in this Agreement, as a condition to
any Transfer, each Third Party Purchaser and any other purchaser or subsequent
transferee must agree to be bound by the terms of this Agreement.
Article 4
Involuntary Transfers
1. Involuntary Transfers. The following events shall each constitute an “Involuntary
Transfer Event” and the affected Shareholder shall be hereinafter referred to as the
“Withdrawing Shareholder” and the remaining Shareholders shall hereinafter be referred
to as the “Non-Withdrawing Shareholders”: (1) the death of a Shareholder; (2) the total
mental or physical disability of a Shareholder; (3) the termination of a Shareholder’s
employment with the Company; and (4) the bankruptcy or insolvency of a Shareholder.
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