Partnership Agreement Samples with Buy-Sell Clause

Introduction

A partnership agreement is a vital document that outlines the terms and conditions of a business partnership. One key component often included is a buy-sell clause, which dictates how a partner’s share can be bought or sold, ensuring stability and clarity in ownership transitions. Below are three diverse examples of partnership agreements that include buy-sell clauses, illustrating different contexts and considerations.

Example 1: Retail Partnership Agreement with Buy-Sell Clause

In this scenario, two entrepreneurs, Alice and Bob, are starting a retail clothing store together. They want to ensure a smooth transition of ownership if one partner decides to exit the business in the future.

The partnership agreement includes a buy-sell clause that stipulates the following:

• If either partner wishes to sell their interest in the partnership, the remaining partner has the first right of refusal to purchase that interest.
• The purchase price will be determined based on a valuation performed by an independent third party, agreed upon by both partners.
• If the remaining partner declines to buy the interest, the departing partner may sell it to an outside party, provided the new partner meets the approval criteria set forth in the agreement.

This structure helps to prevent unwanted changes in ownership and ensures that both partners are on the same page regarding the valuation of their business.

Example 2: Professional Services Partnership Agreement with Buy-Sell Clause

This example involves a partnership of three lawyers, known as Law Firm Trio. They want to include a buy-sell clause in their agreement to address potential future ownership changes due to retirement or personal reasons.

The buy-sell clause is outlined as follows:

• In the event of a partner’s retirement or death, the remaining partners will have the right to purchase that partner’s interest in the firm.
• The purchase price will be calculated based on the average net profits of the firm over the last three years, multiplied by a predetermined factor to arrive at a fair market value.
• Payment can be structured in installments over a period of three years to alleviate financial strain on the remaining partners.

This agreement ensures that the partnership can continue to operate smoothly without significant disruptions, while also providing financial security to the retiring or deceased partner’s estate.

Example 3: Technology Startup Partnership Agreement with Buy-Sell Clause

In this case, a tech startup named Innovatech has three co-founders who want to ensure that their collaborative vision can adapt to potential changes in ownership. They decide to include a comprehensive buy-sell clause in their partnership agreement.

The buy-sell clause includes the following terms:

• If a partner wishes to exit the partnership, they must provide written notice to the other partners at least 60 days in advance.
• A valuation method is established, which includes a formula based on projected revenue and existing contracts, to determine the buyout price.
• The remaining partners can opt to buy out the exiting partner’s share through a combination of cash and promissory notes, allowing for flexibility in financing the buyout.

By including these provisions, the co-founders at Innovatech ensure that they can maintain control over the company’s direction while also accommodating potential changes in their partnership structure.