Free Cross-Purchase Buy-Sell Agreement Template

A cross-purchase buy-sell agreement is a contract in which the remaining owners personally buy a departing owner’s share. The company stays out of the transaction.

That single detail separates it from other buyout structures. Money moves from owner to owner, so the business never spends its own cash and never holds the repurchased interest.

Each buyer picks up a slice of the departing share, usually in proportion to what they already own. For example, two equal partners in a three-owner firm would split the exiting third between them and finish at 50% each.

Small partnerships and professional practices favor this arrangement, especially where the owners are the business. Law firms, medical practices, design studios, and two-person contracting outfits all use it. The people buying the share are the same people generating the revenue.

Nothing in the agreement activates until a trigger arrives. Then a fixed sequence takes over:

1. A trigger fires, such as death, disability, retirement, or a voluntary exit.
2. The remaining owners and the departing owner or their estate receive notice.
3. Valuation follows the method written into the contract.
4. Each buyer takes their allocated portion and releases funding to pay for it.
5. Ownership records, governing documents, and any lender notifications get updated.

Notice who is absent from that list. The company neither prices, buys, nor pays, which is why owners reach for this structure when the business itself runs lean on cash.

Timing matters as much as sequence. Most agreements set a deadline for each step, so a grieving family is not left waiting while the survivors decide what to do.

A cross-purchase buy-sell agreement is one of two common routes to the same destination. Either way the departing owner is paid and the rest stay in control. The structures differ in who signs the check.

With a cross-purchase, the owners buy personally. Under an entity purchase, the company buys the share back and retires it. Choose the cross-purchase route when:

• The owners hold personal funds or individual policies they can draw on.
• The group is small, so the mechanics stay manageable.
• Owners want to hold the acquired shares directly rather than through the company.

Lean the other way when the group is large, when the company holds the cash, or when nobody wants to manage a web of policies.

Tax treatment also differs between the two, sometimes substantially. Therefore ask a CPA which structure suits your ownership before you commit. The answer turns on your entity type and each owner’s position.

This kind of agreement is only as good as the money standing behind it. Most groups fund it with life insurance, and each owner buys a policy on every other owner.

That stays simple with two or three people. Past that, the count climbs quickly:

• Two owners — 2 policies.
• Three owners — 6 policies.
• Four owners — 12 policies.
• Five owners — 20 policies.

Premiums vary by age and health as well. An older owner may pay far more to insure a younger one than the reverse. Some groups answer this with a trust that holds the policies centrally, though that adds cost and administration.

Other funding routes work too. Owners can pay from savings, sign an installment note carrying interest, or arrange financing once a trigger arrives.

Tip: Confirm each policy names the right owner as beneficiary and stays in force. A lapsed policy quietly turns a funded agreement into an unfunded promise, and nobody finds the gap until it matters.

Our cross-purchase buy-sell agreement template covers the standard buyout terms. These clauses handle the mechanics specific to owner-to-owner deals.

Allocation Formula

State exactly how the departing share splits among the buyers. Proportional to current holdings is common, but write it down rather than assuming it.

Purchase Obligations

Clarify whether each remaining owner must buy or may decline. Also say what happens to an unclaimed portion when someone opts out.

Insurance Provisions

Name who owns each policy, who pays the premiums, and where a policy goes when its insured owner leaves while still living.

Valuation Method

Pick one method and apply it to every trigger. Set a review schedule if the price is a figure the owners agree on rather than a calculation.

Payment and Default Terms

Cover the down payment, the installment schedule, the interest rate, and the remedy when a buyer misses payments.

Transfer Restrictions

Block outside transfers without approval, and grant the other owners a right of first refusal.

Signatures

Include dated signature lines for every current owner, since each one is both a potential buyer and a potential seller.

This contract has to fit the paperwork that already governs your company. Read your operating agreement, partnership agreement, or bylaws for transfer restrictions that contradict it, then amend whichever document is out of step.

Signing formalities vary by state and by entity type, so check your state’s official website first. Your lender or franchisor may also place conditions on ownership changes, and asking them directly beats guessing.

Bring in a CPA and a local attorney when the stakes justify it. Ownership transfers touch tax, estate planning, and insurance at once, and the interaction between them is where expensive mistakes hide.

Tip: Give every owner a signed copy and store the original with your formation records. An agreement nobody can locate at the moment of a death or a sudden exit does not function, however carefully it was drafted.

Start your cross-purchase buy-sell agreement today and give every owner a clear exit path.