What is a buy-sell agreement and why is it important?

A buy-sell agreement is a legally binding contract between business co-owners that governs what happens to an ownership interest when a triggering event occurs — such as the death, disability, divorce, retirement, or voluntary departure of an owner. A well-drafted buy-sell agreement establishes a clear process for transferring ownership, a defensible methodology for determining the purchase price, and funding mechanisms (typically life insurance or installment arrangements) to ensure the transaction can actually be completed. Without a buy-sell agreement — or with one that is outdated or poorly structured — a triggering event can create serious disputes, financial hardship, and business disruption. Yeo & Yeo reviews and helps design buy-sell agreements that are current, fair, and built around a valuation methodology that will hold up when it matters most.