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 Oregon, 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.

Oregon Requirements for Buy-Sell Agreement

Governing Law (ORS 60.001 et seq., ORS 63.001 et seq., or ORS 67.001 et seq.)
Specifies that the agreement is governed by Oregon law and complies with ORS Chapter 60 (for corporations), ORS Chapter 63 (for LLCs), or ORS Chapter 67 (for partnerships) as applicable to the business entity type.
Business Entity Compliance (ORS 60.047, ORS 63.047, or ORS 67.050)
Ensures the agreement complies with the specific Oregon statutes governing the particular business entity (corporation, LLC, partnership) and references the entity's articles, bylaws, or operating agreement.
Securities Law Compliance (ORS Chapter 59 (Oregon Securities Law))
Addresses compliance with Oregon Securities Law for any transfer of business interests that might constitute securities transactions, including applicable exemptions.
Federal Securities Compliance (Securities Act of 1933, Securities Exchange Act of 1934)
Ensures compliance with federal securities laws for any transfer of business interests that might constitute securities under federal law, including applicable exemptions.
Valuation Methods (ORS 60.551-60.594 (Corporation statutes on dissenters' rights and fair value))
Establishes legally compliant methods for business valuation upon triggering events, which must be specific, objective, and in accordance with Oregon case law on fair value determinations.
Transfer Restrictions (ORS 60.167 (for corporations), ORS 63.165 (for LLCs))
Details permissible restrictions on the transfer of business interests under Oregon law, including rights of first refusal, mandatory purchase provisions, and transfer prohibitions.
Triggering Events (ORS 60.167, ORS 63.249, ORS 67.220)
Defines events that trigger the buy-sell provisions (death, disability, retirement, termination, divorce, bankruptcy) in compliance with Oregon law regarding involuntary transfers.
Life Insurance Provisions (ORS Chapter 743 (Insurance Code))
Addresses the use of life insurance as a funding mechanism for buy-sell obligations, including insurable interest requirements under Oregon insurance law.
Tax Considerations (Internal Revenue Code § 1001, § 2703; ORS Chapter 118 (Oregon Estate Tax))
Includes provisions addressing federal and Oregon tax implications of business interest transfers, including income tax, capital gains, and estate tax considerations.
Disability Definitions (Americans with Disabilities Act; ORS Chapter 659A)
Provides clear definitions of disability that comply with Oregon and federal disability laws when disability is a triggering event for the buy-sell provisions.
Dispute Resolution (ORS 36.600-36.740 (Oregon Uniform Arbitration Act))
Establishes dispute resolution procedures (mediation, arbitration) in compliance with Oregon's Uniform Arbitration Act for resolving disagreements about the buy-sell agreement.
Spousal Consent (ORS 108.700-108.740 (Premarital Agreements))
Includes provisions for spousal consent to the agreement, particularly important in Oregon as a non-community property state but where marital property rights may affect business interests.
Payment Terms (ORS 82.010 (Oregon usury law); ORS Chapter 79 (Secured Transactions))
Specifies legally compliant payment terms for business interest purchases, including installment provisions that comply with Oregon's usury laws and secured transaction requirements.
Non-Compete Provisions (ORS 653.295 (Oregon non-compete statute))
Includes reasonable non-compete provisions for departing owners that comply with Oregon's strict limitations on non-competition agreements.
Bankruptcy Considerations (11 U.S.C. § 365 (Bankruptcy Code))
Addresses the impact of bankruptcy filings by owners, recognizing the interplay between the buy-sell agreement and federal bankruptcy law.
Contract Formation Requirements (ORS Chapter 71 (Oregon Uniform Commercial Code - General Provisions))
Ensures the agreement meets Oregon's requirements for valid contract formation, including consideration, capacity, and consent elements.
Electronic Signatures (ORS 84.001-84.061; 15 U.S.C. § 7001 et seq.)
Includes provisions allowing for electronic signatures in compliance with Oregon's Electronic Transactions Act and the federal ESIGN Act.
Amendment Procedures (ORS 60.301 (corporations), ORS 63.150 (LLCs), ORS 67.042 (partnerships))
Establishes procedures for amending the buy-sell agreement that comply with Oregon contract law and the business entity's governing documents.
Deadlock Resolution (ORS 60.661, ORS 63.661, ORS 67.290)
Provides mechanisms for resolving business deadlocks between owners in accordance with Oregon business entity laws.
Fiduciary Duties (ORS 60.357 (corporations), ORS 63.155 (LLCs), ORS 67.155 (partnerships))
Addresses the fiduciary duties of business owners under Oregon law, including any permissible modifications to these duties in the buy-sell context.

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

Oregon Requirements for Buy-Sell Agreement

Governing Law (ORS 60.001 et seq., ORS 63.001 et seq., or ORS 67.001 et seq.)

Business Entity Compliance (ORS 60.047, ORS 63.047, or ORS 67.050)

Securities Law Compliance (ORS Chapter 59 (Oregon Securities Law))

Federal Securities Compliance (Securities Act of 1933, Securities Exchange Act of 1934)

Valuation Methods (ORS 60.551-60.594 (Corporation statutes on dissenters' rights and fair value))

Transfer Restrictions (ORS 60.167 (for corporations), ORS 63.165 (for LLCs))

Triggering Events (ORS 60.167, ORS 63.249, ORS 67.220)

Life Insurance Provisions (ORS Chapter 743 (Insurance Code))

Tax Considerations (Internal Revenue Code § 1001, § 2703; ORS Chapter 118 (Oregon Estate Tax))

Disability Definitions (Americans with Disabilities Act; ORS Chapter 659A)

Dispute Resolution (ORS 36.600-36.740 (Oregon Uniform Arbitration Act))

Spousal Consent (ORS 108.700-108.740 (Premarital Agreements))

Payment Terms (ORS 82.010 (Oregon usury law); ORS Chapter 79 (Secured Transactions))

Non-Compete Provisions (ORS 653.295 (Oregon non-compete statute))

Bankruptcy Considerations (11 U.S.C. § 365 (Bankruptcy Code))

Contract Formation Requirements (ORS Chapter 71 (Oregon Uniform Commercial Code - General Provisions))

Electronic Signatures (ORS 84.001-84.061; 15 U.S.C. § 7001 et seq.)

Amendment Procedures (ORS 60.301 (corporations), ORS 63.150 (LLCs), ORS 67.042 (partnerships))

Deadlock Resolution (ORS 60.661, ORS 63.661, ORS 67.290)

Fiduciary Duties (ORS 60.357 (corporations), ORS 63.155 (LLCs), ORS 67.155 (partnerships))

Frequently Asked Questions