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Buyout Agreement

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Updated October 09, 2026

A buyout agreement articulates the terms of a buyout, which occurs when one party purchases another party's ownership interest in a shared asset. The agreement explains how the interest is valued, how it will be paid for, and how ownership will transfer, among other nuances.

Types of Buyouts

These are the most common scenarios in which buyout agreements get used:

  1. Business buyouts. This type of buyout occurs when an owner or member of any business entity, including a corporation, LLC, or partnership, buys the shares or interests of another owner. The language of these agreements must align with the entity’s governing document.
  2. Divorce buyouts. In a divorce, it’s common for one spouse to buy the other spouse’s interest in a jointly owned home or business.
  3. Real estate buyouts. A real estate buyout happens when a co-owner of a home wants to purchase ownership rights from another owner or other owners. These buyouts are also known as sibling buyouts because they frequently occur amongst siblings who inherit a home after a parent dies.
  4. Lease buyouts. When a lessor and lessee (commonly a landlord and tenant) mutually agree to terminate a lease early, they can choose to negotiate a buyout.
Per the Exit Planning Institute, 49% of business owners planned to leave their company within five years, but only 42% had a written plan for how they would handle logistics upon departure.[1]

Buyout Agreements by Type (6)

Buyout agreements differ across contexts. Choose the agreement below that best suits your situation.

Corporate

LLC

Partnership

Divorce

Real Estate (Sibling)

Lease

 

Buy-Sell Agreement – This is basically a business buyout agreement in advance. It becomes effective upon some event, such as the death or permanent disability of an owner.

Key Features

  • Names and mailing addresses for signatories
  • A precise description of the interest being purchased
  • Any liens or encumbrances related to that interest
  • The value of that interest
  • Valuation method
  • Payment terms
  • Payment method
  • Closing terms

Valuing Interest

Buyout agreements typically value interest in one of the following ways:

  • Setting a fixed price
  • Obtaining an independent appraisal (most common in business and real estate buyouts)
  • Agreeing on a formula, such as a multiple of EBITDA (earnings before interest, taxes, depreciation, and amortization)

FAQ

What’s a disability buyout agreement?

This is a type of business buyout agreement that goes into effect if a member or owner of a company becomes permanently disabled to the extent that they can no longer participate in the operations of the business.

What happens if someone refuses to honor a buyout agreement?

If one party doesn’t honor the terms of a buyout agreement, another signatory can sue for damages.

Why can’t I find a template for NBA and athletic contract buyouts?

In these types of buyouts, the remainder of a contract is essentially purchased, releasing an athlete from its terms before its expiration. These buyout agreements must align with a league’s collective bargaining agreement, so they are typically negotiated by agents and attorneys.

Sample

Download: PDF, MS Word, ODT

Sources

  1. National State of Owner Readiness Report