Death or disability can suddenly and negative impact an unprepared business. Even a gradual retirement can hurt the potential for success with continuity and management by successors in the future. That’s where a buy-sell agreement comes into play to help ensure stability and cash flow while the retiree’s buyout was funded. 

Sale to a third party might be considered. A redemption agreement may be a good choice for allowing an entity to purchase the business. A cross-purchase agreement, however, will allow individual owners to make their purchase. Redemption is a simple process, but a downturn in business could allow creditors, the IRS, or the state access to decisions or even funds.

Cross purchase agreements carry the necessity for each owner to insure his partners, all of whom might have their own money needs beyond the general concern for the ongoing business needs. Insurance policies might also be used to fund the buyout, putting the funds in an LLC to ensure that funds are being used by the actual purpose of the funding buyout.