A Buy-Sell Agreement provides for the buying and selling of
the stock in a corporation — usually a small closely held corporation — of a withdrawing shareholder. This agreement benefits both the corporation and its owners. (Sometimes a Buy-Sell Agreement includes a Right of First Refusal Agreement.)Reasons for Withdrawing
A shareholder may either want to (or need to) withdraw from the corporation for a number of reasons, including but not limited to:
Setting the Price
Setting the price of the interest to be bought and sold is both the most important and most difficult part of the Buy-Sell Agreement. Valuing a closely held business is fraught with potential difficulties, but it is a critical part of the agreement. There are different valuation methods from which to choose, including capitalized earnings formula, book value, appraisal, agreed price, or arbitration, among others.
Key Provisions
Key provisions of the Buy-Sell Agreement include:
Hire a Lawyer to Draft the Agreement
You should not attempt to draft a Buy-Bell Agreement by yourself. Hire a lawyer for this!! This agreement can be extremely complicated and is very important for the continuity of your company. Check out How Do I Find a Corporate Attorney? for helpful advice.
For more information on this topic, be sure to read Why You Need a Buy-Sell Agreement.