Which Buy-Sell Agreement
is Right For You?
An effective continuity plan in the event something unexpected happens to an owner is critical for the long-term viability of the business. A buy–sell agreement, which is a legally binding agreement that requires one party to sell and another party to buy ownership interest in a business in the event of the death, disability or departure of an owner, should be part of that plan.
Many factors go into determining which type of buy-sell agreement is right for you, but you can start by asking these key questions.
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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its affiliated US insurance companies.
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How many people have an ownership
interest in the business?
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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its affiliated US insurance companies.
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Springfield, MA 01111-0001. All rights reserved. MM202603-304571.
What is the entity structure
of the business?
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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its affiliated US insurance companies.
©2023 Massachusetts Mutual Life Insurance Company (MassMutual®),
Springfield, MA 01111-0001. All rights reserved. MM202603-304571.
Who is the chosen successor?
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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its affiliated US insurance companies.
©2023 Massachusetts Mutual Life Insurance Company (MassMutual®),
Springfield, MA 01111-0001. All rights reserved. MM202603-304571.
How will you fund the
buy-sell agreement?
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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its affiliated US insurance companies.
©2023 Massachusetts Mutual Life Insurance Company (MassMutual®),
Springfield, MA 01111-0001. All rights reserved. MM202603-304571.
About buy-sell agreements
- C Corporations with two owners are best utilizing what’s called a cross purchase buy-sell agreement where the remaining owner purchases the departing owner’s entire interest at an agreed upon price.
- Businesses with more than two owners are best utilizing what’s called an entity purchase buy-sell agreement. However, if the business is also a C Corporation then a “trusteed” cross purchase buy-sell agreement may be best.
- Sole owners can utilize what’s called a “one-way” buy-sell agreement when a potential buyer of the business can be identified, perhaps a family member or a key employee.
- Of course, to effectively execute any form of buy-sell agreement, funding them with insurance products (life and disability) is recommended.
To learn more, check out these blogs:
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Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111, and its affiliated US insurance companies.
©2023 Massachusetts Mutual Life Insurance Company (MassMutual®),
Springfield, MA 01111-0001. All rights reserved. MM202603-304571.