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Planning for the future of your business– you should consider a buy sell agreement

Many people do not consider what will happen in the event that a partner in a business dies or becomes incapacitated.

A buy sell agreement allows the remaining party/s in the business to buy the interest in the business from the party who has died or become incapacitated.

The buy sell agreement can set out options for how this buy out is to occur.

Often insurance policies are put in place to provide a payout in the event that one of the business owners dies or becomes totally and permanently disabled.  Those payouts can be used to fund the payment for the purchase of the deceased partner’s share.

Consideration needs to be given to what will happen if the market value of the share being bought is greater than the insurance payout.

If the purchaser is to pay the difference, further issues will then have to be considered, e.g. how will the business be valued? How long will the remaining party have to make payment? What will be the capital gains tax consequences in the event the shares or business is sold? How will personal guarantees of the leaving party be dealt with?

There are many other issues to consider – we can advise you on those issues.

If you own a business and would like legal advice on this issue, please contact Matthews Folbigg Lawyers in Parramatta. Our legal team specialises in commercial law, estate planning and asset ownership structures.


We can prepare a buy/sell agreement which is right for your circumstances and the circumstances of your business. 


It is unlikely that the insurance policies alone will be sufficient.   We can advise you on what else you need to do – including updating your Will and other estate planning documents

Contact Phillip Brophy on 02 9635 7966 or email
for more information.