Often starts as a handshake deal. You and me, partners, let’s do this. Let’s also ‘be adults’ and sign a buy-sell agreement just so we cover the bases. Fast forward 5, 10, 20 years…what did I agree to in that agreement again?
When was the last time anyone read your buy-sell, and would the cash actually be there?
For a lot of partnerships, the honest answer is: nobody has, and nobody knows.
A lot of buy-sell agreements are still priced and funded the way they were in year one. The company's moved on. The document hasn't.
You don't need to fix it. You need to ask the question, and hand the answer to your attorney.
That's the whole tip. The rest is what to look for and why it matters at home.
The document in the drawer
A buy-sell agreement is a contract among the owners of a company. It says what happens to an ownership stake when something specific happens: a partner dies, becomes disabled, wants out, or in some agreements, goes through a divorce or a dispute.
It usually answers three things. Who can or must buy the stake. At what price. And how the buyer pays.
Many get signed at founding, when the company is worth little and everyone's healthy and getting along. That's a fine time to sign one. The problem is time. Ten or fifteen years later, the company is a different company. The agreement is still the year-one version.
Question one: what's the price today?
Not what you think the company is worth. What the agreement says it's worth.
Agreements usually set the price one of three ways, and each one can go stale.
A fixed number. Some agreements ask the partners to update it every year. Many never do. The number from the founding year is still the number.
A formula. Something like a multiple of earnings or book value, picked when the company looked very different. A formula that fit a small company can badly miss a larger one.
An appraisal. An outside valuation at the time of the trigger. That can be the most current, but it raises its own questions: who picks the appraiser, who pays, and how long it takes while a family is waiting.
A stale price can miss in either direction. Too low, and a departing partner or a partner's family could get less than the stake may be worth today. Too high, and the buyer may not be able to pay it. Skyrise doesn't provide formal business valuations or appraisals. Whether your number still fits is a question for your attorney and whoever your agreement names to set the price.
Question two: would the cash actually be there?
A price without funding is a promise. The agreement can say who buys and at what number. It can't make the money appear.
Buyouts tend to be paid one of a few ways: life insurance on the owners, company cash, or a note paid over years out of a business that just lost an owner. Each has tradeoffs. Your attorney and CPA own the structure and the tax side. For anything about insurance, ask your insurance professional.
The questions to ask are simple:
If insurance funds it, how much coverage is in place, and when was it bought? Does it still match today's price? (A question for your insurance professional.)
What funds a buyout for disability or a partner who wants out? Those triggers may not be insured at all.
If the plan is to pay over time, could the business actually carry those payments without the departing owner?
One technical note for the attorney conversation: in Connelly v. United States (2024), the Supreme Court held that when a company owns life insurance to buy back a deceased owner's shares, its obligation to buy those shares at fair market value doesn't offset the insurance proceeds when the shares are valued for federal estate tax. If your agreement is funded with company-owned policies, that's a reason to have your attorney and CPA review how the agreement is funded.
Why this is a family problem
The partners signed the agreement. The spouse at home usually didn't, and may never have seen it.
But if something happens to an owner, your spouse may be exposed. The family is the one living with the terms. The price. The payment schedule. Whether the cash is there at all.
For a lot of owner families, the business stake is the biggest number on the family balance sheet. The buy-sell decides what that number turns into, and when. If you're the one who wants out someday, your next chapter runs through the same document.
That's why it belongs in the conversation about organizing an owner's financial world, even though the fix belongs to the attorney.
Bring these to your attorney
Find the signed copy first. Read it once at the kitchen table with the person who shares the consequences. Then take these questions to your attorney:
How is the price set (fixed number, formula, or appraisal), and when was it last updated?
If a partner died or became disabled tomorrow, where does the buyout cash come from, and how fast?
If a partner wanted out, what happens, and is that funded at all?
Does the agreement still match who owns what today?
Does my spouse know this agreement exists and where it is?
Find it. Read it. Ask.
A lot of buy-sells were priced for year one. Find yours, ask what the price is today and whether the cash would be there, and let your attorney own the answer.
If you want a plain look at how we help owners organize their financial world, read our Services page, where you can Book a Fit Call.