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 Nebraska, 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.

Nebraska Requirements for Buy-Sell Agreement

Nebraska Business Corporation Act Compliance (Neb. Rev. Stat. §§ 21-2001 to 21-20,197)
The agreement must comply with the Nebraska Business Corporation Act which governs corporate formation, operation, and dissolution in Nebraska, including provisions related to stock transfers and shareholder agreements.
Nebraska Limited Liability Company Act Compliance (Neb. Rev. Stat. §§ 21-101 to 21-197)
For LLCs, the agreement must comply with the Nebraska Limited Liability Company Act which governs the formation, management, and dissolution of LLCs, including provisions for member interests and transfer restrictions.
Nebraska Uniform Partnership Act Compliance (Neb. Rev. Stat. §§ 67-401 to 67-467)
For partnerships, the agreement must comply with the Nebraska Uniform Partnership Act which governs partnership formation, operation, and dissolution, including provisions for partner interests and transfer restrictions.
Nebraska Securities Act Compliance (Neb. Rev. Stat. §§ 8-1101 to 8-1123)
The agreement must comply with Nebraska securities laws regarding the offer, sale, and transfer of business interests, which may be considered securities under state law.
Nebraska Uniform Commercial Code - Article 8 (Neb. Rev. Stat. §§ 8-101 to 8-511)
Compliance with Nebraska's adoption of UCC Article 8, which governs investment securities and may apply to the transfer of certain business interests.
Nebraska Contract Law Compliance (Neb. Rev. Stat. §§ 25-1801 to 25-1809)
The agreement must comply with Nebraska contract law principles, including requirements for offer, acceptance, consideration, capacity, and legality of purpose.
Nebraska Statute of Frauds (Neb. Rev. Stat. § 36-202)
The agreement must be in writing to comply with Nebraska's Statute of Frauds, which requires certain contracts to be written to be enforceable, particularly those that cannot be performed within one year.
Nebraska Probate Code Compliance (Neb. Rev. Stat. §§ 30-2201 to 30-2902)
The agreement must comply with Nebraska probate laws when addressing transfer of business interests upon death, including provisions that may affect estate administration.
Nebraska Uniform Trust Code (Neb. Rev. Stat. §§ 30-3801 to 30-38,110)
If trusts are used as ownership vehicles or for succession planning, the agreement must comply with Nebraska trust laws governing trust formation and administration.
Nebraska Divorce and Property Division Laws (Neb. Rev. Stat. §§ 42-365 to 42-371)
The agreement should address Nebraska laws regarding marital property division in divorce, which may affect business interests owned by married shareholders/partners.
Nebraska Tax Provisions (Neb. Rev. Stat. §§ 77-2701 to 77-27,135)
The agreement must consider Nebraska state tax implications of business transfers, including potential state income, inheritance, and transfer taxes.
Federal Securities Laws Compliance (Securities Act of 1933, 15 U.S.C. § 77a et seq.; Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq.)
The agreement must comply with federal securities laws, including exemptions from registration for private company stock transfers and restrictions on resale of securities.
Internal Revenue Code Compliance (26 U.S.C. § 1 et seq. (particularly §§ 302, 303, 1014, 2031, 2703))
The agreement must address federal tax implications, including potential income tax, gift tax, and estate tax consequences of business interest transfers.
ERISA Compliance (29 U.S.C. § 1001 et seq.)
If the buy-sell agreement involves employee stock ownership plans or other qualified retirement plans, it must comply with the Employee Retirement Income Security Act.
Americans with Disabilities Act Compliance (42 U.S.C. § 12101 et seq.)
Provisions related to disability triggers must comply with the ADA and not discriminate against owners with disabilities in ways that violate federal law.
Federal Estate Tax Compliance (26 U.S.C. §§ 2001-2210, particularly § 2703)
The agreement must address federal estate tax considerations, including valuation methods that will be respected by the IRS for estate tax purposes.
Nebraska Fraudulent Transfer Act (Neb. Rev. Stat. §§ 36-701 to 36-712)
The agreement must avoid provisions that could be deemed fraudulent transfers under Nebraska law, particularly regarding valuation and payment terms.
Nebraska Uniform Arbitration Act (Neb. Rev. Stat. §§ 25-2601 to 25-2622)
If the agreement includes arbitration provisions for dispute resolution, it must comply with Nebraska's arbitration laws regarding enforceability and procedure.
Federal Arbitration Act (9 U.S.C. §§ 1-16)
If the agreement includes arbitration provisions and involves interstate commerce, it must comply with the Federal Arbitration Act regarding enforceability and procedure.
Nebraska Uniform Power of Attorney Act (Neb. Rev. Stat. §§ 30-4001 to 30-4045)
The agreement should address how powers of attorney may be used in the context of business interest transfers, particularly in disability scenarios.

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

Nebraska Requirements for Buy-Sell Agreement

Nebraska Business Corporation Act Compliance (Neb. Rev. Stat. §§ 21-2001 to 21-20,197)

Nebraska Limited Liability Company Act Compliance (Neb. Rev. Stat. §§ 21-101 to 21-197)

Nebraska Uniform Partnership Act Compliance (Neb. Rev. Stat. §§ 67-401 to 67-467)

Nebraska Securities Act Compliance (Neb. Rev. Stat. §§ 8-1101 to 8-1123)

Nebraska Uniform Commercial Code - Article 8 (Neb. Rev. Stat. §§ 8-101 to 8-511)

Nebraska Contract Law Compliance (Neb. Rev. Stat. §§ 25-1801 to 25-1809)

Nebraska Statute of Frauds (Neb. Rev. Stat. § 36-202)

Nebraska Probate Code Compliance (Neb. Rev. Stat. §§ 30-2201 to 30-2902)

Nebraska Uniform Trust Code (Neb. Rev. Stat. §§ 30-3801 to 30-38,110)

Nebraska Divorce and Property Division Laws (Neb. Rev. Stat. §§ 42-365 to 42-371)

Nebraska Tax Provisions (Neb. Rev. Stat. §§ 77-2701 to 77-27,135)

Federal Securities Laws Compliance (Securities Act of 1933, 15 U.S.C. § 77a et seq.; Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq.)

Internal Revenue Code Compliance (26 U.S.C. § 1 et seq. (particularly §§ 302, 303, 1014, 2031, 2703))

ERISA Compliance (29 U.S.C. § 1001 et seq.)

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

Federal Estate Tax Compliance (26 U.S.C. §§ 2001-2210, particularly § 2703)

Nebraska Fraudulent Transfer Act (Neb. Rev. Stat. §§ 36-701 to 36-712)

Nebraska Uniform Arbitration Act (Neb. Rev. Stat. §§ 25-2601 to 25-2622)

Federal Arbitration Act (9 U.S.C. §§ 1-16)

Nebraska Uniform Power of Attorney Act (Neb. Rev. Stat. §§ 30-4001 to 30-4045)

Frequently Asked Questions