Buy/Sell Agreements
A buy/sell agreement is a legal contract between a buyer and seller of a private corporation (CCPC).
Setting out all the terms in a binding agreement eliminates ambiguity and negotiations at the time of exercise.
A Properly Structured Agreement

A properly-structured agreement requires the following:
- guaranteed purchaser
- guaranteed sale
- guaranteed price
- guaranteed funding
- guaranteed time
Guaranteed Purchaser
Who will buy?
- the surviving partners must buy
Guaranteed Sale
Who will sell?
- the estate of the deceased partner must sell
Guaranteed Price
What is the price?
- have a formula or outside valuation
Guaranteed Funding
How to pay?
- selling personal assets
- borrowing from a bank
- paying in installments
- using a life insurance death benefit (see Corporate Uses of Life Insurance)
Guaranteed Time
When to transact?
- usually at time of
- disability
- retirement
- death
Using Insurance
Using insurance to fund the buy/sell agreement has these advantages
- funds are available when needed
- least expensive solution
- new owner does not incur debt when buying the business
- loans must be repaid
Type
The arrangement can be
- cross purchase
- criss-cross
- each partner buys insurance on the life of each other partner
- use irrevocable beneficiary designations
- each partner buys insurance on the life of each other partner
page revision: 16, last edited: 15 Jan 2012 16:28