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For example, three doctors could form a joint practice, and the doctors can agree to a buyout agreement where all remaining doctors can buy a doctor's ownership for $1,000,000 upon retirement.

A buy/sell agreement is generally structured in one of two ways ? as a cross-purchase agreement or as a redemption agreement. A cross-purchase agreement is an agreement between individual members. In a funded cross-purchase agreement, each member purchases a life insurance policy on the life of every other member.

Contract lawyers draft the buy-sell agreement. They can work with either party when drafting, negotiating, and executing the terms. It is recommended that each partner retain their counsel when entering into this type of contract.

Disadvantages: (1) The price is not determined now; (2) Can become costly; (3) Uncertainty over final value in the process can be stressful; (4) Owner uncertainty over what will happen when a triggering event occurs.

Any stakeholders, including partners or owners, and their current stake in the business' equity. Events that would trigger a buyout, such as death, disability, divorce, retirement, or bankruptcy. A recent business valuation. The structure by which partners would buy or sell their interest in the business.

There are four main types of buy-sell agreements. A redemption or entity purchase, a cross-purchase arrangement, a one-way buy-sell or a wait-and-see buy-sell. To choose the best type of agreement for your clients, consider the following: Business entity structure: What type of business entity does your client own?