Buy-sell agreements are agreements/contracts between co-owners of a business, and provide the circumstances in which one of the owners can sell their interest; who can buy a co-owner’s interest; and how the sale price will be determined. Despite the somewhat confusing name, these buy-sell agreements are not relevant when both owners wish to sell the business to a third party (person or entity other than the two owners).

Because buy-sell agreements are only relevant when one of the co-owners’ interest is being sold, these agreements generally apply when a co-owner retires, gets divorced, goes bankrupt, becomes disabled, or dies. Buy-sell agreements usually provide for the remaining co-owner to buy the exiting co-owner’s interest in the business at an agreed-upon price, or to calculate the purchase price using an agreed-upon method of valuation (for valuing the company). It may be easier to think of these agreements as buyout agreements, as one owner is typically buying-out the other owner. Buy-sell agreements should carefully address these situations in which an owner is likely to exit the business, or in which the ownership of the business might otherwise change—for example, upon the divorce of an owner—and include the agreement and signature of the co-owners’ spouses if necessary.

In Indiana, buy-sell agreements are contracts among co-owners of a business that outline the conditions under which a co-owner's interest in the business may be sold. These agreements are crucial for establishing the process for a co-owner to sell their share to the remaining co-owners or to a pre-approved third party, particularly in situations such as retirement, divorce, bankruptcy, disability, or death. The agreements typically specify who is eligible to buy a departing co-owner's interest and how the sale price will be determined, either through a pre-determined formula or valuation method. Buy-sell agreements are not concerned with the sale of the entire business to outside parties but focus on the transition of ownership between existing co-owners. It is important for these agreements to address potential changes in ownership thoroughly and to include the consent of any spouses, if necessary, to prevent future legal complications. While Indiana state statutes do not prescribe a specific format for buy-sell agreements, they must comply with general contract law principles and any relevant federal laws, such as tax implications and securities regulations if applicable.