An earnout provision makes the purchase price (typically, some part of it) payable in the future dependent on the buyer's financial performance. Earnout arrangements have important tax implications for both the buyer and seller.This article focuses on the buyer side of the equation. An earn-out works as a mechanism that allows the buyer to defer a portion of the purchase price until the occurrence or failure of a predetermined metric. An earnout provision can be utilized if an entrepreneur seeking to sell a business is asking for a price more than a buyer is willing to pay. An earnout agreement is an arrangement between a seller and buyer where a portion or all of the selling price is contingent on future performance.