A Buy-Sell Agreement, also known as a ‘buy-out’ agreement, governs the exit of owners from a business. The structure of the business doesn’t matter, the business can be operated through a unit trust, a company, a partnership, or any other type of business structure that allows for more than one owner.
These agreements are often executed between the business entity (if it has separate legal status) and any individual owners or structures through which they are operating. The key purpose of the agreement is to grant an option to:
1. continuing’ owners, so that they have ‘first-dibs’ over the purchase of the outgoing owner’s share; and
2. outgoing’ owners, to have their share purchased by the business entity or the continuing co-owners.
The Why Every Business Needs a Buy Sell Agreement
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