Entrepreneur Information: Understanding Buy-Sell Provisions

One important aspect of entrepreneur information is the buy-sell agreement. This agreement dictates how ownership of the company is going to transfer to another party. Here are a few provisions of the buy-sell agreement that you will want to understand.

Who Will Buy

With the buy-sell agreement, you are going to decide who is going to buy part of the ownership in the company. For example, if you have four partners in business together, and one of them passes away, the remaining three partners might buy equal shares of the business from that estate. You need to decide how each portion of the business is going to be split up for this process.

Funding the Purchase

You also need to discuss how the purchase is going to be funded. In some cases, one of the partners may want to purchase the ownership shares with cash. In other cases, the partners may want to take out life insurance policies on each other. This way, if one of the partners passes away unexpectedly, the life insurance policy will provide the exact amount of money that the surviving partners need to purchase the deceased's ownership in the business from his or her family members.

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