Scottsdale and Phoenix, Arizona Contract Attorney- Arizona Buy-Sell Agreement Article- Business Formation Protection

Law Office Of

Joseph A. Velez


Real Estate & Business Law Attorney

The Law Office of Joseph Velez

Commercial Real Estate & Business Law Attorney

Scottsdale Financial Center

7272 E. Indian School Rd., Suite 111

Scottsdale, Arizona 85251


If you are a business co-owner or a partner in a partnership, it is vital to protect you family’s interests in the event you should become disabled or die prematurely.  Fortunately, you can resolve many issues by formulating a “buy-sell agreement.”

Background:  A buy-sell agreement  is a legally binding agreement that provides for an orderly sale of a business interest upon the happening of a specified event.  Usually, the agreement is structured so the event is the death or a business owner, but the obligation to “buy and sell” may also be triggered by disability, retirement or some other significant occurrence.

There are three basic types of “buy-sells.”

  1. 1.With a cross-purchase agreement, the surviving owners or partners essentially agree to buy each other out.  Let’s say that Zachary, Zelda, and Zenon are equal owners in Triple Z Corporation.  Under a cross-purchase type of agreement, if any one of the owners dies, the two survivors purchase the interest from the decreased owner’s sale.

  2. 2.If you use a redemption agreement - also called an entity agreement - the business itself purchases the interest of the deceased owner in certain circumstances, a cross- purchase agreement may be combined with a redemption agreement. 

  3. 3. Finally, a buy- sell agreement may accommodate a sale of the business interest to key employees who know the operation inside-out.  The key employees might be members of the family who are already employed by the business.

There are several instant benefits resulting from a buy-sell agreement.

> There is an obligated buyer for the business at a fixed price or formula upon the death or disability of the owner in the absence of such an agreement, the estate or the disabled owner may be forced to sell the business at a “bargain basement” price.

> It provides a smooth transfer of the business in a manner agreed upon by the owners in advance of the triggering event. This can help minimize disruptions to customers or clients while the business is in the process for recovering. 

> The proceeds from the sale of the deceased owner’s interest can pay certain estate settlement expenses (e.g. state taxes and administration costs).  In addition, part of the proceeds may be allocated to help pay the living expenses of the deceased owner;s family members.  If the owner is disabled, the proceeds may be used to pay the family’s living expenses.

> The price established in the buy-sell agreement may be used to provide a valuation for federal estate-tax purposes (with certain limitations.)

With professional assistance, you can have a buy-sell tailored to your specific needs.

Our law office represents clients throughout the Phoenix, Arizona area including the cities of Scottsdale, Maricopa, Mesa, Surprise, Paradise Valley, Avondale, Gilbert, Chandler, Glendale, Florence, New River, Fountain Hills, Peoria, Surprise, Queen Creek, Tempe, Sun City, Apache Junction, and Casa Grande. We serve the counties of Maricopa, Yavapai, Gila, Pinal, La Paz, Yuma, and Pima County.

DISCLAIMER: This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice. Seek competent legal counsel for advice on any legal matter.

One hour initial office consultation fee is $295 for the matters discussed above.