Buy And Sell Agreement

AAA

DEFINITION of 'Buy And Sell Agreement'

An approach used by sole proprietorships, partnerships and closed corporations to divide the business share or interest of a proprietor, partner, or shareholder. The owner of the business interest being considered has to be disabled, deceased, retired or expressed interest in selling. The buy and sell agreement requires that the business share is sold according to a predetermined formula to the company or the remaining members of the business. Before the interest of a deceased partner can be sold to the company or remaining partners, the deceased's estate must agree to sell.

INVESTOPEDIA EXPLAINS 'Buy And Sell Agreement'

In order to ensure the availability of funds in the event of a partner's death, most parties will purchase life insurance policies on the other partners. In the event of a death, the proceeds from the life insurance policy are used to purchase a portion of the deceased's business interest. It is important to note that when a sole proprietor dies, since he/she has no partners, a key employee is the buyer or successor.



RELATED TERMS
  1. Internal Claim

    A claim by a creditor that is restricted to the business's assets ...
  2. Joint Venture - JV

    A business arrangement in which two or more parties agree to ...
  3. Life Insurance

    A protection against the loss of income that would result if ...
  4. Sole Proprietorship

    The sole proprietor is an unincorporated business with one owner ...
  5. Partnership

    A business organization in which two or more individuals manage ...
  6. Maquiladora

    A Spanish term for a factory located near the United States-Mexico ...
RELATED FAQS
  1. Which terms should be included in a partnership agreement?

    Partnerships can be complex depending on the scope of business operations and the number of partners involved. To reduce ... Read Full Answer >>
  2. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  3. What are the benefits for a company investing in a greenfield investment?

    Advantages of greenfield investments include increased control, the ability to form marketing partnerships and the avoidance ... Read Full Answer >>
  4. What is a family Limited Liability Company (LLC)?

    A family limited liability company (LLC) is formed by family members to conduct business in a state that permits such form ... Read Full Answer >>
  5. What is the difference between a silent partner and a general partner?

    Business structures provide benefits to business owners and entrepreneurs. In the small business arena, the most common business ... Read Full Answer >>
  6. What are the liabilities of a silent partner?

    Because of the nature of their interest in a business, silent partners have limited liability that extends only up to the ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Looking For Profit In Privately-Held Companies

    Private companies offer unique opportunities for those with the knowledge and resources to take advantage.
  2. Personal Finance

    Protect Your Personal Assets

    A family limited partnership (FLP) can go a long way toward securing your family's property.
  3. Entrepreneurship

    Business Startup Costs: It's In The Details

    Don't overlook the details when starting up a business. It's the small expenses that have the potential to make or break a great idea.
  4. Options & Futures

    Asset Protection For The Business Owner

    Could incorporating your business help protect it? Find out here.
  5. Entrepreneurship

    401(k) Plans For The Small Business Owner

    If you own a business, this may be the plan for you! Find out about its benefits and eligibility requirements.
  6. Entrepreneurship

    Netflix's New Strategy: Penetrate Your Hotel Room

    Will Netflix’s new venture—to offer its media content in hotels—pay dividends? Investopedia explores the business potential and related developments.
  7. Entrepreneurship

    Nike and the NBA, a Perfect Duo?

    What does Nike's recent eight-year contract partnership with the NBA entail for its largest competitor Under Armor?
  8. Stock Analysis

    Is PayPal Worth More Than eBay?

    Examine the online payment processor, PayPal, and discover its projected value increase as a standalone company, separate from eBay.
  9. Professionals

    Tops Tips to Prep Your Advisory Practice for Sale

    Here are three tips financial advisors should follow when prepping their practice for a sale to help with a smooth transaction and transition.
  10. Entrepreneurship

    MLPs: Is Now the Right Time to Invest?

    Here's what you need to know about MLPs, those under-the-radar investment vehicles.

You May Also Like

Hot Definitions
  1. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  2. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  3. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  4. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  6. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!