Buy-Sell Agreement FAQ
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What happens if a company needs to, but can't afford to, buy out one of its owners?
6. What happens if a company needs to, but can't afford to, buy out one of its owners?
Requiring an immediate 100% lump-sum cash payout can prevent even the most successful company from buying back an owner's interest. That's why having flexible payment terms built into a buy-sell or buyout agreement, signed in advance, can help. For instance, a buyout agreement can provide for a down payment of 1/4 to 1/3 of the buyout price followed by installment payments for three to five years at a reasonable rate of interest. For more on buyout agreements, see Nolo's Business Buyout Agreements.