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 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 earnout allows the buyer to pay a higher potential reward to the seller while simultaneously reducing the buyer's risk. An earnout is a form of contingent, deferred consideration that is often utilized to reconcile a difference of opinions between the buyer and the seller.