Defining a Buy-Sell

A shareholder agreement, or buy-sell agreement, is a legally binding contract between shareholders of a privately held business that establishes a procedure for redeeming or buying out an ownership interest in that business when a specific event occurs, such as death, disability, retirement, divorce, or termination of employment. The buy-sell agreement is the most critical document in any business succession plan, since a properly drafted agreement provides protection to the owner’s interest and ensures that the owner’s business legacy continues in accordance with his wishes long after he has left the company.