Buy-Sell Agreement Template

Q: What is a buy-sell agreement?

It is a contract among the owners of a business that sets who may buy an owner's interest, the price or valuation method, and the triggers such as death, disability, divorce, retirement, or a voluntary exit. It keeps ownership inside the group and prevents disputes when an owner leaves.

Q: What is the difference between a buy-sell agreement and an operating agreement?

An operating agreement or bylaws set how the business runs day to day. A buy-sell agreement covers only ownership transitions: what happens to an owner's share on death, disability, divorce, or departure, how it is priced, and who may buy it. Many companies keep both.

Q: What is the difference between a cross-purchase and a redemption buy-sell agreement?

In a cross-purchase, the remaining owners individually buy the departing owner's share, often funded by policies they hold on each other. In a redemption, the business itself buys the share back. A hybrid lets the parties decide which applies when the trigger happens. Each has different tax effects.

Q: How is the business valued in a buy-sell agreement?

By the method the owners choose: a fixed price they restate periodically, a formula such as a multiple of earnings or book value, or an independent appraisal at the time of the trigger. Whatever the method, set it clearly and update it regularly so the price stays realistic.

Q: How is a buyout funded?

Most owners fund it with life or disability insurance on each owner, a sinking fund set aside over time, or installment payments from the buyer after the trigger. The goal is to have cash available when it is needed, matched to the agreed valuation so the buyer can actually pay.

Q: Does a buy-sell agreement need to be notarized?

In most states, no. A buy-sell agreement is valid as a signed writing, with no notarization, witnesses, or government filing required. Keep the signed agreement with the company records and note any transfer restriction on the share certificates. A few state-specific rules may apply.

Q: Do buy-sell agreement rules vary by state?

The core terms are the same everywhere, but some rules vary. Community-property states may require a spouse's consent or notice for a community-property business interest, and states differ on whether a non-compete on a departing owner is enforceable. Use the version for your state for the exact rule.

Set who can buy an owner's share, at what price, and on what triggers, before you ever need it.

Introduction

A buy-sell agreement is a contract among the owners of a business that decides in advance who may buy an owner's share, at what price, and on what triggers such as death, disability, divorce, retirement, or a voluntary exit. It keeps ownership inside the group, gives the remaining owners a clear path to buy, and prevents a forced sale or a dispute when someone leaves. The core terms are the same nationwide: the structure (cross-purchase, entity redemption, or a hybrid), the triggering events, the valuation method, and how the buyout is funded. A few rules do vary by state, most notably spousal consent in community-property states and how a non-compete on a departing owner is enforced, so check the version for your state.

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Key Things to Know

1
A buy-sell agreement is a binding contract among co-owners that fixes who can buy a departing owner's interest, the price or valuation method, and the triggering events, so a death, divorce, or exit does not force the business into a dispute or a sale to an outsider.
2
There are three common structures. In a cross-purchase the remaining owners buy the departing owner's share; in an entity redemption the business itself buys it back; a hybrid or wait-and-see agreement lets the parties choose at the time of the trigger.
3
Set the triggers explicitly. The usual ones are death, long-term disability, retirement, voluntary departure, divorce, and bankruptcy of an owner. Each trigger can have its own price and payment terms, so define them rather than leaving them to negotiation later.
4
Choose a valuation method and keep it current. Common methods are a fixed price the owners restate periodically, a formula such as a multiple of earnings, or an independent appraisal at the time of the trigger. Update the number at least once a year.
5
Fund the buyout before you need it. Owners commonly use life or disability insurance on each owner, a sinking fund, or installment payments, so the buyer has cash when a trigger occurs. Match the funding to the valuation so the price and the money available line up.
6
Some rules vary by state. Community-property states may require a spouse's consent or notice before an owner disposes of a community-property business interest, and states differ on whether a non-compete on a departing owner is enforceable. See the version for your state for the specific rule.
7
No notarization, witnesses, or government filing is required in most states. A buy-sell agreement is valid as a signed writing. Keep the signed agreement with the company records, note any transfer restriction on the share certificates, and review it after major changes. Attorney review is available.

Key decisions before you file

Before you file a Buy-Sell Agreement in Georgia, a few decisions shape the document: which option to choose and what each one means. The Buy-Sell Agreement guide walks through them.

Open the Buy-Sell Agreement guide

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Buy-Sell Agreement

This Buy-Sell Agreement (the "Agreement") is made on [date] among [Company name], a [state] [entity type] (the "Company"), and the persons who own interests in the Company and sign below (each an "Owner" and together the "Owners").

1. Purpose

The Owners want to keep ownership of the Company within the current group, provide a fair and orderly way to buy an Owner's interest when a triggering event occurs, set the price and payment terms in advance, and give each Owner a ready market for the interest. This Agreement controls the transfer of every ownership interest in the Company.

2. Transfer Restrictions

No Owner may sell, assign, pledge, or otherwise transfer all or any part of an ownership interest except as this Agreement allows. Any attempted transfer that violates this Agreement is void. Before any voluntary transfer to an outside party, the selling Owner must first offer the interest to the Company and then to the other Owners on the terms in Section 5. The Company shall note this restriction conspicuously on each ownership certificate.

3. Triggering Events

An Owner's interest becomes subject to purchase on any of the following: (a) death; (b) permanent disability, as defined in Section 9; (c) retirement or voluntary withdrawal; (d) termination of employment or service; (e) divorce, to the extent an interest would pass to a former spouse; (f) bankruptcy, insolvency, or an assignment for the benefit of creditors; or (g) an attempted transfer in violation of this Agreement.

4. Purchase Structure

The Owners elect one of the following, as stated in the Schedule: (a) Cross-Purchase, in which the remaining Owners buy the departing Owner's interest in proportion to their existing interests; (b) Redemption, in which the Company buys the interest; or (c) Wait and See, in which the Company has the first option and the remaining Owners may buy any interest the Company does not.

5. Right of First Refusal

If an Owner receives a bona fide written offer to buy an interest, the Owner shall give the Company and the other Owners written notice with the offer terms. The Company, and then the other Owners, may buy the interest on the same terms within [number] days. If neither buys, the Owner may complete the sale to the third party on those terms, and the buyer takes the interest subject to this Agreement.

6. Purchase Price and Valuation

The purchase price is the value of the interest determined by the method the Owners select in the Schedule: (a) a fixed price the Owners restate at least once each year; (b) a formula, such as a multiple of earnings or book value; or (c) an appraisal by a qualified independent appraiser as of the valuation date. The Owners should review and update the value regularly so the price stays realistic.

7. Funding

The buyout may be funded by life insurance or disability insurance on each Owner, a sinking fund, installment payments by the buyer, or a combination. Where insurance funds the purchase, the Schedule lists each policy, its owner, and its beneficiary, and the parties shall keep the coverage in force and match it to the current value.

8. Closing and Payment

The closing occurs within [number] days after the price is fixed. At closing, the buyer pays the price in cash or under the payment terms in the Schedule (for example, a down payment with the balance paid over [number] years with interest at [rate]), and the selling Owner delivers the interest free of liens and signs the documents needed to transfer it.

9. Disability

"Permanent disability" means an Owner's inability, because of illness or injury, to perform the Owner's regular duties for [number] consecutive months, determined as the Schedule provides. On permanent disability, the Owner's interest is purchased under the same terms that apply to the other triggering events.

10. General

This Agreement binds the Owners and their heirs, estates, and successors. It may be amended only by a writing signed by all Owners. If a court finds any provision unenforceable, the rest remains in effect. This Agreement is a signed writing and does not require notarization unless the Owners choose to notarize it. Attorney review is available.

Signatures.

Company: ______________________ Date: __________

Owner: ______________________ Date: __________

Complete the bracketed items and the Schedule for your Company. This template is general information, not legal advice; attorney review is available. For state-specific requirements, see the version for your state.

Georgia Requirements for Buy-Sell Agreement

Governing Law (O.C.G.A. § 13-2-1)
Specifies that the agreement is governed by Georgia law and complies with O.C.G.A. § 13-2-1, which establishes the requirements for valid contracts in Georgia.
Business Entity Compliance (O.C.G.A. § 14-2-101 et seq. (corporations); O.C.G.A. § 14-11-100 et seq. (LLCs))
Ensures the agreement complies with Georgia's business entity laws based on the company structure (corporation, LLC, partnership), including proper authorization for stock or interest transfers.
Triggering Events (O.C.G.A. § 13-3-1)
Defines specific events that trigger the buy-sell provisions, including death, disability, retirement, termination, bankruptcy, or divorce, in compliance with Georgia contract law requirements for specificity.
Valuation Methods (O.C.G.A. § 13-3-1 and § 13-3-2)
Establishes legally compliant methods for business valuation upon triggering events, which must be specific enough to be enforceable under Georgia contract law.
Payment Terms (O.C.G.A. § 11-2-101 et seq. and § 11-9-101 et seq.)
Outlines payment structures and timelines for business interest purchases that comply with Georgia's Uniform Commercial Code provisions regarding sales and secured transactions.
Life Insurance Provisions (O.C.G.A. § 33-24-3)
Details requirements for life insurance policies used to fund buy-sell agreements, complying with Georgia insurance regulations and insurable interest requirements.
Transfer Restrictions (O.C.G.A. § 13-8-2)
Establishes restrictions on transferring business interests to third parties, with right of first refusal provisions that comply with Georgia's restraint of trade laws.
Disability Provisions (O.C.G.A. § 33-24-3 (for insurance definitions))
Defines disability in accordance with Georgia law and establishes procedures for determining disability status that trigger buy-sell provisions.
Dispute Resolution (O.C.G.A. § 9-9-1 et seq.)
Establishes arbitration or mediation procedures for resolving disputes related to the agreement, in compliance with Georgia's Arbitration Code.
Tax Considerations (26 U.S.C. § 1001 et seq.)
Addresses federal tax implications of the buy-sell agreement, including compliance with Internal Revenue Code provisions related to business interest transfers.
Estate Planning Integration (26 U.S.C. § 2001 et seq. (Federal); O.C.G.A. § 53-1-1 et seq. (Georgia Probate Code))
Ensures the buy-sell agreement coordinates with estate planning documents and complies with federal estate tax laws and Georgia probate code.
Spousal Consent (O.C.G.A. § 19-5-13)
Requires spousal consent to the agreement to prevent future challenges, particularly in Georgia which is an equitable distribution state for divorce proceedings.
Securities Law Compliance (15 U.S.C. § 77a et seq. (Federal Securities Act); O.C.G.A. § 10-5-1 et seq. (Georgia Securities Act))
Ensures compliance with federal and Georgia securities laws if the business interests constitute securities under applicable regulations.
Non-Compete Provisions (O.C.G.A. § 13-8-50 et seq.)
Includes reasonable non-compete provisions for departing owners that comply with Georgia's Restrictive Covenants Act, which has specific requirements for enforceability.
Amendment Procedures (O.C.G.A. § 13-4-4)
Establishes procedures for amending the agreement that comply with Georgia contract law requirements for modifications.
Deadlock Resolution (O.C.G.A. § 14-2-940 (corporations); O.C.G.A. § 14-11-801 (LLCs))
Provides mechanisms for resolving business deadlocks between owners, complying with Georgia business entity laws regarding management disputes.
Bankruptcy Provisions (11 U.S.C. § 101 et seq.)
Addresses what happens to business interests in bankruptcy proceedings, complying with federal bankruptcy code while respecting Georgia creditor rights.
Divorce Contingencies (O.C.G.A. § 19-5-13)
Establishes procedures for handling business interests in divorce proceedings, complying with Georgia's equitable distribution laws.
Americans with Disabilities Act Compliance (42 U.S.C. § 12101 et seq.)
Ensures disability provisions comply with federal ADA requirements to prevent discrimination claims related to disability-triggered buyouts.
Electronic Signatures (O.C.G.A. § 10-12-1 et seq. (Georgia); 15 U.S.C. § 7001 et seq. (Federal))
Allows for electronic execution of the agreement in compliance with Georgia's Uniform Electronic Transactions Act and federal E-SIGN Act.

Frequently Asked Questions

What is a buy-sell agreement?

What is the difference between a buy-sell agreement and an operating agreement?

What is the difference between a cross-purchase and a redemption buy-sell agreement?

How is the business valued in a buy-sell agreement?

How is a buyout funded?

Does a buy-sell agreement need to be notarized?

Do buy-sell agreement rules vary by state?

Introduction

Key Things to Know

Key decisions before you file

Customize your Buy-Sell Agreement Template with DocDraft

Buy-Sell Agreement

1. Purpose

2. Transfer Restrictions

3. Triggering Events

4. Purchase Structure

5. Right of First Refusal

6. Purchase Price and Valuation

7. Funding

8. Closing and Payment

9. Disability

10. General

Georgia Requirements for Buy-Sell Agreement

Governing Law (O.C.G.A. § 13-2-1)

Business Entity Compliance (O.C.G.A. § 14-2-101 et seq. (corporations); O.C.G.A. § 14-11-100 et seq. (LLCs))

Triggering Events (O.C.G.A. § 13-3-1)

Valuation Methods (O.C.G.A. § 13-3-1 and § 13-3-2)

Payment Terms (O.C.G.A. § 11-2-101 et seq. and § 11-9-101 et seq.)

Life Insurance Provisions (O.C.G.A. § 33-24-3)

Transfer Restrictions (O.C.G.A. § 13-8-2)

Disability Provisions (O.C.G.A. § 33-24-3 (for insurance definitions))

Dispute Resolution (O.C.G.A. § 9-9-1 et seq.)

Tax Considerations (26 U.S.C. § 1001 et seq.)

Estate Planning Integration (26 U.S.C. § 2001 et seq. (Federal); O.C.G.A. § 53-1-1 et seq. (Georgia Probate Code))

Spousal Consent (O.C.G.A. § 19-5-13)

Securities Law Compliance (15 U.S.C. § 77a et seq. (Federal Securities Act); O.C.G.A. § 10-5-1 et seq. (Georgia Securities Act))

Non-Compete Provisions (O.C.G.A. § 13-8-50 et seq.)

Amendment Procedures (O.C.G.A. § 13-4-4)

Deadlock Resolution (O.C.G.A. § 14-2-940 (corporations); O.C.G.A. § 14-11-801 (LLCs))

Bankruptcy Provisions (11 U.S.C. § 101 et seq.)

Divorce Contingencies (O.C.G.A. § 19-5-13)

Americans with Disabilities Act Compliance (42 U.S.C. § 12101 et seq.)

Electronic Signatures (O.C.G.A. § 10-12-1 et seq. (Georgia); 15 U.S.C. § 7001 et seq. (Federal))

Frequently Asked Questions