Buy - Sell Agreements - CPA Clinics

Buy - Sell Agreements - CPA Clinics

Buy-sell agreements are usually part of a succession plan put in place to protect the financial interests of the owners of closely held companies and their heirs and to protect the company’s stability in case of a major event. Funding buy – sell agreements is frequently accomplished using insurance policies under (1) a cross purchase agreement, or (2) a stock redemption agreement.

Cross purchase agreement. Each owner of the company takes out, and is beneficiary of, an insurance policy on each of the other owners. In the event of an owner’s death, the other owners use the insurance proceeds to buy out the decedent’s ownership share in the company from the decedent’s beneficiaries.