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 Nebraska, buy-sell agreements are legally recognized contracts that outline the conditions under which a co-owner of a business can sell their interest, who is eligible to purchase this interest, and how the sale price is to be determined. These agreements are particularly relevant in situations where one co-owner wishes to exit the business due to retirement, divorce, bankruptcy, disability, or death. The purpose of a buy-sell agreement is to ensure a smooth transition of ownership under these circumstances, often allowing the remaining co-owner(s) to purchase the departing owner's interest. The agreement may specify a predetermined price or provide a formula for valuation of the company. It is important for such agreements to address potential changes in ownership comprehensively and may require the consent and signature of the co-owners' spouses, especially in cases where marital assets include business interests. Nebraska state statutes and federal law do not prescribe a specific format for these agreements, but they must adhere to general contract law principles to be enforceable.