Buy-sell agreement

Definition

What happens to a co-owner's stake when they die, quit, or want out.

Why It Matters

Anyone buying with a partner wants this before the first disagreement rather than after it. It fixes the trigger events, how a departing share is valued, and who is obliged to buy it, which is the difference between an orderly exit and a forced sale of the whole business. Fund it deliberately as well: an obligation to buy out a partner's half with money you do not have is a promise that breaks at exactly the moment it is needed.

In numbers: A 50/50 partnership with no agreed valuation method can spend more arguing than the stake is worth. Fixing it now at 4x SDE, or at an appraisal both sides accept, costs $0 today.