A buy-sell agreement is a contract among business co-owners that specifies what happens to an owner’s interest when triggering events occur — death, disability, retirement, divorce, or being let go. Three main structures exist: a cross-purchase agreement, where remaining owners buy the departing owner’s shares and receive a basis step-up; an entity-purchase agreement, where the company redeems the shares for ease; and a trusteed cross-purchase arrangement, which can help streamline ownership transfers when multiple owners are involved. These agreements are typically funded with life insurance and key-person disability insurance. A wealth advisor can help you evaluate which structure may be appropriate for your business, family, and succession goals.
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