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LSDefine
Simple English definitions for legal terms
buy-sell agreement
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A quick definition of buy-sell agreement:
A buy-sell agreement is a rule that says if someone who owns part of a business wants to leave or dies, they have to sell their part of the business back to the other owners or the business itself. This is to make sure that the people who own the business can control who else gets to own part of it. It's like a promise that the owners make to each other to keep the business safe and in good hands.
A more thorough explanation:
A buy-sell agreement is a legal agreement that limits the ownership rights of closely-held organizations. It requires that when an owner decides to leave or passes away, their shares must be resold to either the organization or current partners. This is done to keep control over who is in the business.
For example, let's say that John and Jane own a small business together. They have a buy-sell agreement in place that states if one of them decides to leave the business, they must sell their shares back to the other partner. This ensures that the remaining partner has control over who is involved in the business.
Buy-sell agreements are common in partnerships and proprietorships where the owners have a lot of control within the business. The owners want to make sure that their stake in the business cannot be given to an untrustworthy person. A buy-sell agreement prevents any form of transferring ownership except back to the business or other owners, even in a will.
Overall, a buy-sell agreement is a way for closely-held organizations to maintain control over who is involved in the business and ensure that ownership stays within trusted individuals.