Buy Sell Agreement For Small Business -

A buy-sell agreement is a legally binding contract between business co-owners that acts as a "business will," detailing how an owner's interest will be transferred or sold upon specific "triggering events" like death, disability, or retirement. It ensures business continuity by preventing outsiders from gaining control and establishing a fair, predetermined price for ownership stakes.

The remaining owners individually buy the departing owner's shares. This is simplest for small businesses with 2–3 owners and can offer tax benefits like a "step-up" in cost basis.

A clear formula or process to determine the price of the interest being sold. buy sell agreement for small business

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Owners agree on a set dollar amount. It is simple but risky because it quickly becomes outdated if not updated annually. A buy-sell agreement is a legally binding contract

Uses financial metrics like a multiple of EBITDA or revenue. It provides objectivity but may fail to capture intangible assets like goodwill.

Hiring a professional to value the company at the time of the event. This is generally the most accurate method but can be costly and time-consuming. Funding the Buyout This is simplest for small businesses with 2–3

Outlining how the remaining owners or business will pay for the buyout. Common Agreement Structures