Why are Buy-Sell Agreements used?
Buy-sell agreements may be used with any type of business entity to define the rights and responsibilities of owners upon the happening of different events, such as death or disability of an owner or dissolution of the business entity. Buy-sell agreements are sometimes referred to as shareholder agreements for corporations, operating agreements for limited liability companies and partnership agreements for partnerships. These agreements establish a value and payment terms for a buy-out of an owner, and generally restrict one’s right to sell one’s interests to a third party. These agreements can also describe management responsibilities, voting rights and distribution standards.
