Buy-sell agreements generally fall into two categories: cross-purchase agreements and entity-purchase agreements. Under a cross-purchase agreement, the remaining owners acquire the ownership interest of a departing or deceased partner. In contrast, an entity-purchase agreement requires the business itself to redeem the interest of the selling owner. These agreements commonly incorporate life insurance policies, which serve as a reliable and pre-funded source of capital, ensuring sufficient liquidity for a smooth ownership transition in the event of an owner’s unexpected death.
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