Entity Buy-Sell Agreements

What Is a Buy-Sell Agreement?

When a business owner dies, the disposition of his or her business interest can become a two-edged sword, creating problems for the business owner's heirs as well as the business itself. Critical questions must be answered:

• Who will purchase the business interest?
• What is a fair price?
• When will the sale be made?
• Where will the funds come from?

This "disposition dilemma" is easily resolved when a buy-sell agreement is established. This agreement provides that:

• someone (e.g., the business entity, the surviving owners, or a key employee) will purchase a deceased owner's interest at an agreed-upon price, and
• the deceased owner's estate is obligated to sell the interest at that price.

The Purpose of Buy-Sell Agreements

Cross-Purchase: An Alternative to Entity Agreements

The Life Insurance Advantage

Family Attribution Rules