A buy sell agreement is a contract that ensures an efficient transition of ownership during certain events. Commonly, these agreements are used to facilitate an orderly change of events after an individual dies. These types of contracts are used by businesses of all sizes, although they are generally best suited towards smaller businesses, especially those with one or more co-owners. For example, if two individuals own a business and one of them passes away then a buy sell agreement would help transfer ownership from the deceased individual to either the other co-owner or whoever has been specified in the agreement.

In most cases, a buy sell agreement involves one of the partners agreeing to purchase the other partners portion of the business if they were to pass away. This is a practice commonly known as a cross purchase. One of the reasons that this particular type of agreement is so popular is that it greatly simplifies the process of deciding who will retain control of the business if one of the owners were to die. In many cases, the heirs of an owner are either too young to take the place of the deceased individual or are not interested in running the business themselves.

Many buy sell agreements are funded through a life insurance policy. In the most basic sense, each of the individuals involved in the ownership of a company purchases a life insurance policy for the other person. They then list themselves as the primary beneficiary so that if the other individual dies the life insurance policy will pay off to the surviving individual who could then use the proceeds to purchase the deceased person's share of the business. These agreements do away with the legal wrangling that was often involve the past when one owner of a company passed away.

As with most legal agreements, it is often a good idea to consult with an attorney or legal professional in order to work out the finer details of the buy sell agreement. Ensuring a smooth transition of ownership not only prevents any legal problems, it also makes it possible for the surviving individuals to quickly get on with their lives rather than having to deal with on settled matters regarding the ownership of a particular business. These agreements help to keep all business dealings fair and allow all parties to be rewarded for the hard work that was put into the business.