What Are The Different Types Of Buy-Sell Agreements? (2026)

Sarah Edwards

Contributor

Reviewed By Adam Ramirez, J.D.

Editor

May 11, 2026 Read in 2 mins

Summary

Buy-sell agreements outline what happens to a departed owner’s shares
Shares are usually bought by the business or individual partners
Having an agreement in place can help avoid major disputes

Being part of a business partnership or ownership group has its advantages. But if you retire, become disabled or otherwise leave the company, what happens to your interest in the business?

A buy-sell agreement can determine the answer to that question. There are a few types of buy-sell agreements, and having the right one in place could protect your company from expensive, acrimonious legal battles.

Common Types of Buy-Sell Agreements

Most of the time, business owners creating buy-sell agreements choose one of the following:

General buy-sell agreement
Cross-purchase buy-sell agreement
Redemption buy-sell agreement

Here’s a closer look at these types of buy-sell agreements and when you might use each one.

General Buy-Sell Agreement

General buy-sell agreements are sometimes called “business prenups.” They outline what will happen to an owner’s shares of the business if one of the following happens:

Retirement
Disability
Death
Divorce
Resignation or any other departure from the company

Having an agreement in place helps ensure continuity after one partner leaves. It also stops a partner from buying or selling their shares to an outsider.

If you own a business with other people, creating a general buy-sell agreement can safeguard everyone’s business interests and peace of mind.

Cross-Purchase Buy-Sell Agreement

With this kind of buy-sell agreement, the other partners in the business purchase the departing partner’s shares. Notably, this kind of agreement can increase each remaining partner’s cost basis in the business, which decreases the future capital gains taxes they may owe.

Cross-purchase buy-sell agreements are usually funded by life insurance policies, so they tend to work best in companies owned by two or three people. If you think this might be the best buy-sell agreement for your company, you can create your cross-purchase buy-sell agreement in minutes online.

Redemption Buy-Sell Agreement

With a redemption buy-sell agreement, the business itself, rather than the individual partners in the business, buys the departing partner’s shares. The buyout is usually funded by a life insurance policy or the company’s own funds.

If a business has several co-owners, this might be a more feasible alternative to a cross-purchase buy-sell agreement. If you think it’s the right option, creating your own redemption buy-sell agreement is quick and easy.

Why Choosing the Right Buy-Sell Agreement Matters

Creating and maintaining a business comes with a lot more paperwork than many people realize. Establishing the right buy-sell agreement early on can help you and your partners avoid confusion and disputes if one of you leaves the company in the future.

When you take the time to understand buy-sell agreements and other essential legal forms, you can better protect your own interests as well as those of your business.