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 Mississippi, 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.

Mississippi Requirements for Buy-Sell Agreement

Governing Law (Mississippi Code § 75-1-105)
Specifies that the agreement is governed by Mississippi law and complies with all applicable state statutes regarding business contracts and entity-specific regulations.
Business Entity Compliance (Mississippi Code § 79-4-1 et seq. (Corporations); § 79-29-101 et seq. (LLCs); § 79-13-101 et seq. (Partnerships))
Ensures the buy-sell agreement complies with Mississippi's entity-specific statutes based on whether the business is a corporation, LLC, partnership, or other entity type.
Securities Compliance (Securities Act of 1933; Securities Exchange Act of 1934; Mississippi Securities Act § 75-71-101 et seq.)
Addresses compliance with federal and state securities laws for any transfer of business interests that might be considered securities.
Triggering Events (Mississippi Code § 75-2-101 et seq.)
Defines specific events that trigger the buy-sell provisions, including death, disability, retirement, voluntary withdrawal, termination, bankruptcy, or divorce of an owner.
Valuation Methods (Mississippi Code § 75-2-302 (Unconscionable Contract Provisions))
Establishes legally compliant methods for valuing the business interest upon a triggering event, which must be fair and reasonable under Mississippi contract law.
Life Insurance Provisions (Mississippi Code § 83-7-1 et seq.)
Addresses the use of life insurance as a funding mechanism for buy-sell obligations, complying with Mississippi insurance regulations.
Tax Considerations (Internal Revenue Code § 1001 et seq.; Mississippi Code § 27-7-1 et seq.)
Includes provisions addressing federal and state tax implications of business interest transfers, including potential capital gains taxes and estate tax considerations.
Right of First Refusal (Mississippi Code § 75-2-201 et seq.)
Establishes procedures for offering business interests to existing owners before selling to outside parties, in compliance with Mississippi contract law.
Dispute Resolution (Mississippi Code § 11-15-1 et seq. (Arbitration))
Provides mechanisms for resolving disputes related to the buy-sell agreement, including mediation, arbitration, or litigation procedures recognized under Mississippi law.
Restrictive Covenants (Mississippi Code § 75-21-1 et seq.)
Includes non-compete, non-solicitation, and confidentiality provisions that comply with Mississippi's reasonable restrictions on trade requirements.
Deadlock Resolution (Mississippi Code § 79-4-14.30 (Corporations); § 79-29-802 (LLCs))
Establishes procedures for resolving management deadlocks that could trigger buy-sell provisions, in accordance with Mississippi business entity laws.
Disability Provisions (Americans with Disabilities Act; Mississippi Code § 43-6-1 et seq.)
Defines disability in accordance with federal ADA standards and Mississippi law, and establishes procedures for business interest transfers in case of owner disability.
Estate Planning Integration (Mississippi Code § 91-1-1 et seq.)
Ensures the buy-sell agreement coordinates with estate planning documents and complies with Mississippi probate and estate administration laws.
Spousal Consent (Mississippi Code § 93-5-1 et seq.)
Includes provisions for spousal consent to the buy-sell agreement, particularly important in Mississippi as an equitable distribution state for divorce proceedings.
Payment Terms (Mississippi Code § 75-2-301 et seq.)
Establishes legally enforceable payment structures and timelines for business interest purchases that comply with Mississippi's Uniform Commercial Code provisions.
Amendment Procedures (Mississippi Code § 75-2-209)
Defines procedures for modifying the buy-sell agreement that comply with Mississippi contract law requirements for amendments.
Electronic Signatures (Electronic Signatures in Global and National Commerce Act; Mississippi Code § 75-12-1 et seq.)
Addresses the validity of electronic signatures in accordance with federal E-SIGN Act and Mississippi's Uniform Electronic Transactions Act.
Minority Shareholder Protections (Mississippi Code § 79-4-14.30 et seq. (Corporations); § 79-29-306 (LLCs))
Includes provisions that protect minority owners' rights in accordance with Mississippi's corporate and LLC laws regarding minority owner protections.
Fiduciary Duties (Mississippi Code § 79-4-8.30 (Corporations); § 79-29-123 (LLCs))
Addresses the fiduciary duties of business owners during buy-sell transactions in accordance with Mississippi business entity laws.
Force Majeure (Mississippi Code § 75-2-615)
Includes provisions addressing unforeseeable circumstances that might affect the execution of buy-sell provisions, in compliance with Mississippi contract law.

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

Mississippi Requirements for Buy-Sell Agreement

Governing Law (Mississippi Code § 75-1-105)

Business Entity Compliance (Mississippi Code § 79-4-1 et seq. (Corporations); § 79-29-101 et seq. (LLCs); § 79-13-101 et seq. (Partnerships))

Securities Compliance (Securities Act of 1933; Securities Exchange Act of 1934; Mississippi Securities Act § 75-71-101 et seq.)

Triggering Events (Mississippi Code § 75-2-101 et seq.)

Valuation Methods (Mississippi Code § 75-2-302 (Unconscionable Contract Provisions))

Life Insurance Provisions (Mississippi Code § 83-7-1 et seq.)

Tax Considerations (Internal Revenue Code § 1001 et seq.; Mississippi Code § 27-7-1 et seq.)

Right of First Refusal (Mississippi Code § 75-2-201 et seq.)

Dispute Resolution (Mississippi Code § 11-15-1 et seq. (Arbitration))

Restrictive Covenants (Mississippi Code § 75-21-1 et seq.)

Deadlock Resolution (Mississippi Code § 79-4-14.30 (Corporations); § 79-29-802 (LLCs))

Disability Provisions (Americans with Disabilities Act; Mississippi Code § 43-6-1 et seq.)

Estate Planning Integration (Mississippi Code § 91-1-1 et seq.)

Spousal Consent (Mississippi Code § 93-5-1 et seq.)

Payment Terms (Mississippi Code § 75-2-301 et seq.)

Amendment Procedures (Mississippi Code § 75-2-209)

Electronic Signatures (Electronic Signatures in Global and National Commerce Act; Mississippi Code § 75-12-1 et seq.)

Minority Shareholder Protections (Mississippi Code § 79-4-14.30 et seq. (Corporations); § 79-29-306 (LLCs))

Fiduciary Duties (Mississippi Code § 79-4-8.30 (Corporations); § 79-29-123 (LLCs))

Force Majeure (Mississippi Code § 75-2-615)

Frequently Asked Questions