BUY-SELL AGREEMENT, A STARTING TEMPLATE
Growing Partners (growingpartners.org)

This is general information, not legal or tax advice. It shows what a complete
buy-sell agreement covers and in what order. Every bracket needs a decision, the
valuation and insurance sections need numbers only an appraiser, an insurance agent
or the owners' own figures can supply, and a lawyer and a tax adviser licensed in
your state should both read the finished document before anyone signs it or buys a
policy. Connelly v. United States, 602 U.S. 257 (2024), changed how a company-owned
life insurance payout is treated when valuing an entity-redemption agreement for
federal estate tax purposes; read that case, and the Connelly-related article on this
site, before choosing entity redemption funded by company-owned insurance over a
cross-purchase or a hybrid structure.

BUY-SELL AGREEMENT

This Buy-Sell Agreement ("Agreement") is entered into as of [DATE], by and among
[COMPANY NAME], a [STATE] [entity type] (the "Company"), and [OWNER 1 NAME],
[OWNER 2 NAME] [AND ADDITIONAL OWNERS AS NEEDED] (each an "Owner" and together the
"Owners").

RECITALS
The Owners together own all of the ownership interests in the Company. The Owners
and the Company want to provide for an orderly transfer of an Owner's interest on
death, disability, withdrawal or another triggering event, at a price and on terms
agreed in advance.

1. DEFINITIONS
"Interest" means an Owner's entire ownership interest in the Company. "Triggering
Event" means any event described in Section 2. "Purchase Price" means the amount
determined under Section 3. "Disability" has the meaning given in Section 7.

2. TRIGGERING EVENTS
This Agreement is triggered by:
   (a) the death of an Owner;
   (b) the Disability of an Owner, as defined in Section 7;
   (c) an Owner's voluntary withdrawal, on [NUMBER] days' written notice to the
   Company and the other Owners;
   (d) an Owner's divorce, the filing of bankruptcy by an Owner, or the entry of a
   judgment or charging order against an Owner's Interest that is not vacated within
   [NUMBER] days;
   (e) the Company's termination of an Owner's employment for [CAUSE, DEFINED]; or
   (f) the unanimous written agreement of the Owners to trigger a buyout.

3. VALUATION
On a Triggering Event, the Purchase Price for the affected Owner's Interest is:
[OPTION A: a fixed price of $[AMOUNT] per percentage point of ownership, as last
updated in writing by all Owners on [DATE]. If not updated within the prior
[NUMBER] months, the price under Option B applies instead.]
[OPTION B: [MULTIPLE] times the Company's trailing twelve-month [SDE/EBITDA], as
calculated under Exhibit A, as of the last day of the month before the Triggering
Event.]
[OPTION C: the fair market value determined by an independent appraiser selected
under Section 3.1, as of the last day of the month before the Triggering Event.]
3.1 Appraiser selection. If Option C applies, or if the Owners cannot agree on the
calculation under Option B, each side shall select a qualified business appraiser
(ASA, ABV or CVA credentialed) within [NUMBER] days, the two appraisers shall
select a third within [NUMBER] further days, and the average of the two valuations
closest to each other controls. The Company pays the cost of this process.

4. FUNDING WITH LIFE INSURANCE
[OPTION A, ENTITY REDEMPTION: The Company shall own and pay the premiums on a life
insurance policy on each Owner, with a death benefit of at least $[AMOUNT] per
Owner. On an Owner's death, the Company shall apply the proceeds of that Owner's
policy first to the Purchase Price under Section 6, retaining any excess and
funding any shortfall under the note terms in Section 6.2.]
[OPTION B, CROSS-PURCHASE: Each Owner shall own and pay the premiums on a life
insurance policy on each other Owner, with a death benefit of at least
$[AMOUNT] divided among the policies that Owner holds. On an Owner's death, the
surviving Owners shall apply the proceeds of the policies they hold on the
deceased Owner first to the Purchase Price under Section 6.]
[OPTION C, TRUSTEED CROSS-PURCHASE OR HYBRID: see Exhibit B.]
4.1 Disposition of a policy on withdrawal. If an Owner's Interest is bought out
for a reason other than death, the policy or policies insuring that Owner shall be
[transferred to the departing Owner at cash surrender value / cancelled for its
cash surrender value, credited against the Purchase Price / reassigned among the
remaining Owners], as the Owners elect in writing within [NUMBER] days of the
Triggering Event.
4.2 No reduction of value by the obligation to redeem. The parties intend that,
for any purpose where it matters, including federal estate tax valuation, this
Agreement's price-setting formula under Section 3 is what controls the value of
an Owner's Interest to the extent permitted by section 2703 of the Internal
Revenue Code and the holding of Connelly v. United States, 602 U.S. 257 (2024);
the parties acknowledge that life insurance proceeds payable to or for the benefit
of the Company on an Owner's death may nonetheless be included in the value of
the Company's assets for that purpose, and that a cross-purchase structure
(Option B) avoids that issue by keeping the proceeds out of the Company
altogether.

5. DISABILITY BUYOUT
A Disability is the inability, certified by a physician agreed by the Owners or
appointed under Section 3.1's process, to perform the essential duties of the
Owner's role in the business for [NUMBER] consecutive days, or [NUMBER] days
within any 12-month period. [IF FUNDED WITH DISABILITY INSURANCE: The Company
shall own a disability buyout policy on each Owner providing a benefit of
$[AMOUNT] [AS A LUMP SUM / OVER [NUMBER] MONTHS], applied first to the Purchase
Price.]

6. PAYMENT OF THE PURCHASE PRICE
6.1 At closing. [NUMBER]% of the Purchase Price, less any insurance proceeds
applied under Section 4, is paid in cash at closing, which occurs within
[NUMBER] days of the Purchase Price being finally determined.
6.2 Promissory note. The balance, if any, is paid under a promissory note bearing
interest at not less than the applicable federal rate in effect when the note is
signed, in [NUMBER] equal monthly installments, secured by [the bought-out
Interest / a security interest in the Company's assets / a personal guarantee of
the remaining Owners].

7. VOLUNTARY WITHDRAWAL
An Owner who withdraws under Section 2(c) before [MILESTONE, IF ANY, E.G. A
DEFINED VESTING DATE] receives the Purchase Price reduced by [PERCENTAGE]%, paid
over [NUMBER] months rather than under Section 6, to reflect the cost of an
unplanned departure to the remaining Owners.

8. INVOLUNTARY EVENTS
On a divorce, bankruptcy or judgment affecting an Owner's Interest under Section
2(d), the Company and the remaining Owners have the first right, for [NUMBER]
days, to purchase the affected Interest, or the portion subject to the claim, at
the Purchase Price under Section 3, before it may be transferred to a spouse,
trustee, creditor or judgment holder.

9. RIGHT OF FIRST REFUSAL
Before transferring an Interest to anyone other than under this Agreement, an
Owner shall first offer it to the Company and the other Owners on the same terms,
who have [NUMBER] days to accept.

10. TAX MATTERS
[FOR A PARTNERSHIP OR LLC TAXED AS A PARTNERSHIP: The Company and the Owners
intend that a purchase of an Interest under this Agreement by the Company be
treated consistently with sections 736, 741, 751 and 754 of the Internal Revenue
Code, as applicable, and the Company shall consider a section 754 election at the
time of any purchase. This Agreement is not tax advice; each Owner should consult
that Owner's own tax adviser before a Triggering Event occurs.]

11. DISPUTE RESOLUTION
A dispute over the Purchase Price, other than the appraisal process in Section
3.1, or over any other term of this Agreement, shall be submitted to mediation
under the rules of [PROVIDER] before either side may file suit, [OPTIONAL: and,
if mediation does not resolve it within [NUMBER] days, to binding arbitration
under the rules of [PROVIDER]].

12. MISCELLANEOUS
This Agreement binds and benefits the Owners' heirs, personal representatives and
permitted assigns. It may be amended only in writing signed by all Owners then
bound by it. It is governed by the laws of the State of [STATE]. It supersedes
every prior agreement on the same subject.

IN WITNESS WHEREOF, the Company and the Owners have signed this Agreement as of
the date first written above.

___________________________          ___________________________
[COMPANY NAME], by its authorized     [OWNER 1 NAME]
representative
Date: ______________                  Date: ______________

___________________________
[OWNER 2 NAME]
Date: ______________