Which one do you need?
| Buy-sell agreement | Purchase agreement (APA / SPA) | |
|---|---|---|
| Parties | Co-owners (and sometimes the company) | Seller(s) and buyer |
| When signed | Years before any sale | At the sale |
| Main job | Triggers, valuation method, funding (often insurance) | Price, what transfers, reps and warranties, indemnities, closing conditions |
| Common failure | Stale fixed price; no funding | Weak indemnity caps; vague working capital |
Buy-sell agreement: check these now
- Triggers: death, disability, divorce, retirement, termination, deadlock.
- Valuation method: a fixed price signed years ago is almost always wrong; use a formula or an independent appraisal process.
- Funding: life and disability insurance or an installment schedule the company can afford.
- Right of first refusal before any owner can sell to an outsider - including a PE platform that approaches one partner.
Purchase agreement: the sections that move money
- Purchase price and adjustments (working capital, debt, cash).
- Representations and warranties about your financials, taxes, licenses, employees and contracts.
- Indemnification: caps, baskets, survival periods - see escrow and holdbacks.
- Covenants: non-compete and non-solicit (state law varies; see California and Florida).
- Closing conditions: financing, landlord consent, license approvals.
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Frequently asked questions
What is a buy-sell agreement?
A contract among business co-owners that sets when an owner must or may sell their share, how it is valued, and how the purchase is funded.
Is a buy-sell agreement the same as a purchase agreement?
No. The buy-sell governs co-owners before any sale; the purchase agreement is the contract for an actual sale.
Who drafts the purchase agreement?
Usually the buyer’s counsel drafts; your attorney negotiates. Have a deal attorney, not a generalist, review it.
Sources
- Florida Statutes 542.335 - restrictive covenants (sale of business) (accessed 2026-09-23)
- California B&P Code 16601 (FindLaw) (accessed 2026-09-23)