Entrepreneur Information: Common Buy-Sell Provisions

There is important entrepreneur information to understand about buy-sell agreements. Here are a few common provisions that are found in buy-sell agreements.

When Purchase Occurs

With a buy-sell agreement, you are going to need to specify when a purchase is going to occur. In some cases, the agreement is going to cover only if one of the business owners dies. In other cases, the agreement will also cover what happens if one of the partners decides to leave the business. 

Insurance

Many times, life insurance is going to be utilized with this type of agreement to make sure that enough cash is present for the sale. For example, if there are multiple owners of a business, they could implement a life insurance policy on each member in conjunction with a buy-sell agreement. They would agree on a purchase price when the agreement is set up. Then, if one of them died unexpectedly, the life insurance policy would pay a certain amount of money to the surviving owners. The owners of the business would then use that money to purchase the share of the business from the deceased individual's family. This ensures that there is enough cash to purchase a portion of the business when one owner dies.

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