Buy-sell agreement definition

A buy-and-sell agreement (buy/sell agreement) typically refers to a legal document that details the disposition of a business that's closely held by more than one party, such as a partnership, corporation or limited liability company, in the event that one of the parties dies, becomes disabled, or retires. The agreement spells out how one party is to acquire the other party's position, including at what price, or some method of valuation.

Life insurance is often purchased in conjunction with a buy/sell agreement, to provide the funds for purchase in the case of a death.

There could be other events that trigger the execution of a buy/sell agreement, such as divorce, or merely when one party wants to end the relationship. For this reason, a buy/sell agreement should be written with legal counsel when partners join to start a business to prevent future disputes in the event business problems occur.