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 Rhode Island, buy-sell agreements are contracts among co-owners of a business that outline the conditions under which one owner can sell their interest, who is eligible to purchase a co-owner's interest, and how the sale price will be determined. These agreements are particularly relevant in situations where a co-owner retires, divorces, declares bankruptcy, becomes disabled, or passes away. 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 at a predetermined price or one calculated through a specified valuation method. These agreements are crucial for maintaining business continuity and protecting the interests of all parties involved. It is important for such agreements to be comprehensive and to address potential changes in ownership due to personal life events of the co-owners. In some cases, it may be necessary to include the consent and signature of the co-owners' spouses to ensure the enforceability of the agreement. While there is no specific Rhode Island statute governing buy-sell agreements, they are generally subject to contract law principles and must be crafted to comply with applicable state laws and federal regulations.