Are buy sell agreements used for buying and selling businesses?
Despite its simple name, no, buy sell agreements generally have very little to do with the buying and selling of businesses. Instead, buy sell agreements are contracts that link co-owners of businesses together and controls when owners can sell their respective interests in a company or business. In addition, these agreements dictate who can buy an owner’s interest in a company and also sets the price at which the interest will be sold. Buy sell agreements only come into force when an owner of a business dies, retires, is bankrupted, becomes disabled or is divorced. Likening a buy sell agreement to a prenuptial agreement is a valid comparison — they govern when a co-owner is getting out of the business just like when a couple is getting out of a marriage. Buy sell agreements generally cover only transactions that occur between the business owners, which is why they are sometimes referred to merely as buyout agreements.
