Buy/Sell Agreements
Mintedwealthmanagement
When two or more people go into business together, they usually share a vision and excitement for the future. But what happens when life throws a curveball?
A buy/sell agreement is a legally binding contract that outlines what happens to each partner’s share of the business if one of four major events occurs: death, disability, illness, or disagreement. Without one, business owners leave themselves — and their families — vulnerable to confusion, conflict, and potentially devastating financial consequences.
Let’s break down why this agreement matters:
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Death – If a partner passes away, their ownership stake often passes to their estate or next of kin. Without a buy/sell agreement, the remaining partner could end up in business with a spouse or heir with no interest (or expertise) in running the business.
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Disability or Illness – A partner who is no longer able to contribute to the business due to illness or injury may still retain their ownership share, potentially creating an imbalance in workload and profit distribution.
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Disagreement – Even the best business relationships can break down. A buy/sell agreement provides a clear, pre-determined method for parting ways without litigation or damage to the business.
This is where insurance plays a crucial role. In many cases, partners take out life or disability insurance policies on each other, with the business or co-owners named as beneficiaries. This ensures that if a triggering event occurs, there’s funding in place to buy out the affected partner’s share — without straining the business or personal finances.
In short, a properly structured buy/sell agreement supported by insurance turns a potentially chaotic situation into a manageable, pre-planned process.
Too many business owners delay setting one up — until it’s too late. If you're in a partnership and haven’t had this conversation, now is the time.