A buy-and-sell agreement specifies how the remaining shareholders in a company will purchase the shares of a co-shareholder if they die or become disabled.
In addition to the agreement, shareholders typically make provision for funding the purchase of the shares through life insurance policies or, if one of the shareholders is uninsurable, other forms of funding.
If the agreement isn’t watertight, it can lead to disputes, unnecessary taxes, and a slew of other negative consequences for the business and family of the life insured.