A buy-sell agreement provides for the purchase of the disabled owner's share of the business at death, disability or retirement, either by the business entity or one of the owners, at an established price or formula for determining the price. The agreement is a formal, legally binding document, which obligates one party to sell and another party to buy at the agreed upon price, or to use an agreed-upon formula to set the price. Buy-sell agreements must be drawn up by an attorney.
What's more, the plan must be formally adopted by the owners or major shareholders.
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