Buy-Sell Agreement

Estate Documents

A contract between business co-owners that controls how an ownership interest is transferred or bought out on death, disability, retirement, divorce, or other triggering events.

A buy-sell agreement is a contract among the owners of a closely held business — and often the entity itself — that controls what happens to an ownership interest when a triggering event occurs. The triggering events typically include death, long-term disability, retirement, divorce, bankruptcy, and an attempted transfer to a non-owner.

Why Arizona Business Owners Need One

Without a buy-sell, an owner's interest can pass under a will or a trust to a spouse, children, or creditors who have no business running the company. The remaining owners can suddenly find themselves co-owners with someone they never chose. A buy-sell pre-decides who can buy the interest, how it is valued, and how the buyout is funded.

Common Structures

The three classic forms are the cross-purchase (each owner buys the others out directly), the entity redemption (the company buys the interest), and the hybrid (a mix of the two). Funding usually involves life insurance on each owner, a sinking fund, or a structured installment note.

For the broader Arizona walkthrough of how buy-sell agreements fit alongside FLPs, key-person insurance, and succession planning for closely held businesses, read our pillar guide: Business Succession Planning in Arizona: The Complete Guide.

Related Terms

Irrevocable Life Insurance Trust (ILIT)

Irrevocable Trust

Attestation

Bequest

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