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In a buy-sell agreement, the owner or business pays the premium for the life insurance policy.

Here is how buy-sell agreements work: Determine which events invoke a triggered buyout. Establish who has rights and purchase obligations. Identify the names and address of the purchasers. Set a purchase price or valuation with applicable discounts. Establish payment terms as well as their intervals.

purchase agreement is a document that allows a company's partners or other shareholders to purchase the interest or shares of a partner who dies, becomes incapacitated or retires. The mechanism often relies on a life insurance policy in the event of a death to facilitate that exchange of value.

9 Things to Include in a Business Purchase Agreement Identification of Parties. Business Description. Financial Terms. Assets & Liabilities Included and Excluded from the Sale. Transfers. Third-Party Brokers. Closing Date, Time, and Logistics. Warranties, Representations, and Contingencies.

Life insurance is one of the most popular methods to fund a buy-sell agreement. In this scenario, the company purchases insurance on the life of each of its owners. When one of the owners passes away, the company receives a death benefit from the insurance policy, which it uses to purchase the deceased owner's stock.

A buy and sell agreement assures a smooth transition of ownership and business continuity in the event of a departure of a partner or large equity owner. The agreement is a legally-binding contract that establishes how the departing owners' shares will be obtained by the remaining partners.