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The Trigger Events In addition to an owner separating from the business, other triggering events include the passing of an owner, a divorce, a bankruptcy or an injury or disability as well as a material breach of certain contractual or fiduciary obligation of an owner.

There are two common forms of buy-sell agreements: In a cross-purchase agreement, the remaining owners or partners purchase the share of the business that is for sale. In an entity-purchase agreement (also known as a redemption agreement), the business entity itself buys the deceased's share of the business.

Possible methods for determining the value of an ownership interest (i.e., purchase/sale price) under a buy/sell agreement include (1) a fixed price per unit; (2) requiring an independent appraisal; or (3) using a formula approach.

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.

The business pays the premiums and therefore exists as the owner and beneficiary of the policy. When an employee-owner dies, that share of the company passes to the heirs of his or her estate. Then the business can use the policy's death benefit to buy the interest from the estate.

The agreement is a legally-binding contract that establishes how the departing owners' shares will be obtained by the remaining partners. Without such an agreement, there can be legal battles and contestation.

If you don't have a binding buy-sell agreement in place, your business is at risk. Without a clear succession plan, disputes can arise among partners?or their surviving spouses?that lead to loss of valuable time, increased expenses, and costly litigation.

The four types of buy sell agreements are: Cross-purchase agreement. Entity purchase agreement. Wait-and-See. Business-continuation general partnership.