A buy-sell agreement sets rules for ownership transfers when specified events occur, such as death, disability, retirement, or a proposed sale. It may address who can buy, how value is set, payment terms, timing, and restrictions. Owners should check whether the agreement reflects current ownership, applicable professional entity rules, and realistic funding. A formula written years ago may not reflect the firm's current economics or intended transaction purpose. Review definitions, valuation procedures, dispute resolution, insurance funding, and how a buyer is selected. Make sure the agreement coordinates with entity documents, estate plans, employment arrangements, and loan covenants. Do not assume an insurance benefit equals the business value or that the agreement controls every third-party contract. Ask qualified counsel and tax advisers to explain implications.
Set a recurring review when ownership changes, a new state is added, the firm borrows money, or an owner's role shifts. Start by comparing the agreement's owner names and percentages with the current ledger and governing documents. Then read the triggering events carefully. Does retirement mean a stated age, notice period, or departure from employment? How is disability determined, and who decides? What happens if an owner wants to sell to a family member or outside buyer?
Pay close attention to how price is determined. A fixed amount may become stale. A formula may rely on accounting information that does not reflect backlog risk, claims, owner dependence, or current market conditions. The agreement might call for an independent valuation, set a process for selecting the professional, or permit a dispute if parties disagree. Ask a credentialed valuation professional whether the method fits the purpose and ask counsel how a dispute would be resolved.
Funding deserves its own review. Life or disability insurance may help fund a purchase, but policy proceeds can differ from the purchase price and may not address every transfer event. Confirm who owns each policy, who pays premiums, and how proceeds are applied. Model whether remaining owners or the firm can make payments over time without weakening operations.
Coordinate the agreement with estate documents, entity rules, employment arrangements, lender covenants, and client contracts. Ask an attorney to identify conflicts and a CPA to explain tax effects for sellers and buyers.
This is general education, not legal, tax, investment, or engineering advice; licensed PE judgment and local codes govern.
