What’s a Buy-Sell Agreement—and Why Every Oregon or Idaho Partnership Needs One
Most partnerships begin with optimism. You’ve got a great idea, great energy, maybe even a growing customer base. The last thing anyone wants to do is sit down and talk about what happens if someone quits, dies, or wants to sell.
But if you skip that conversation, your business is built on a handshake—and a legal time bomb.
What Is a Buy-Sell Agreement?
A buy-sell agreement is a contract between business partners that outlines what happens when one of you leaves the business—voluntarily or not.
Think of it like a business prenup. It protects everyone by setting expectations ahead of time—while you’re still on good terms.
Is It Part of an Operating Agreement?
Sometimes. But many free or outdated operating agreements either skip this entirely or use vague, generic terms that don’t help when real decisions need to be made.
Whether you include it in your main agreement or as a standalone document, what matters is that it’s clear, complete, and tailored to your business.
What Should a Buy-Sell Agreement Include?
1. Triggering Events
These are the life changes that activate the agreement. Common examples:
Voluntary withdrawal or retirement
Death or disability
Divorce or bankruptcy
Involuntary termination
Disputes or deadlock
If you don’t define these, state law won’t solve the problem for you—especially in Oregon and Idaho, where default rules are limited.
2. Valuation Method
How will you determine the price of the departing partner’s interest?
Book value?
Fair market value?
A multiple of earnings or revenue?
Third-party appraisal?
Don’t wait until emotions are running high to argue about the number.
3. Payment Terms
Can the business afford a lump sum? Or do you need installment payments? Will you use life or disability insurance to fund a buyout?
A good agreement sets realistic timelines and mechanisms that won’t bankrupt the company.
What Happens Without One?
Here are a few real-world examples from Oregon and Idaho businesses that skipped or mishandled their buy-sell planning:
Boise Design Firm
Three partners, no agreement. One wants out, demands one-third of the business’s current valuation. The others can’t agree on a number—or how to fund it. Legal threats follow. Within six months, the firm dissolves.
Eugene Café
A married couple brings on a friend as a minority partner. Years later, he becomes seriously ill and wants to exit. There’s no buyout plan, and no insurance. The business can’t cover the cost. It’s sold under pressure, and everyone loses.
Bend Fitness Studio
Two partners. One goes through a divorce. With no agreement limiting transfers, a court awards the ex-spouse a share of the business. Now the remaining partner has a new co-owner they never signed up for—and no way to unwind it cleanly.
These aren’t edge cases. They’re common. And they’re preventable.
What Else Should It Address?
Who can buy the departing partner’s interest? (Remaining partners only? Can it be sold to a third party?)
Can ownership pass to heirs? (And if so, do they get voting rights?)
How do you handle sudden incapacity?
How do you value and buy out partial interests?
What happens in the case of a deadlock?
Funding the Buyout
This is often the linchpin.
If your business doesn’t have the cash to fund a buyout—and most don’t—you need a plan:
Installment payments with interest
Life and disability insurance policies held by the business or partners
Promissory notes backed by assets or guarantees
Without one of these, even a well-drafted agreement can fail in practice.
It’s About Respect, Not Pessimism
Buy-sell agreements aren’t about anticipating failure. They’re about honoring your business and your relationships by protecting them.
You will face change at some point. One of you will want out. One of you will get divorced. One of you might pass away. If you haven’t planned for that, the business—and your friendship—can fall apart.
The best time to plan for these things is before they happen.
What If You Already Have an Agreement?
When was it written?
Was it downloaded from a national website?
Does it reflect your actual ownership, contributions, and goals?
If you don’t know what it says—or if it says nothing—it’s time to revisit it.
At Track Town Law, I help Oregon and Idaho business owners draft buy-sell agreements that are practical, enforceable, and built for real life. Business services are billed hourly, and there’s no sales pitch—just experienced legal guidance so you’re not stuck rewriting your entire structure mid-crisis.
Book a consultation if you need to create, revise, or simply review your current partnership terms.
This post is based on Episode 7 of the Doing Business As podcast. If you’d rather listen, or want to share this with a business partner, you’ll find it on all major podcast platforms.
And if you also need flat-fee estate planning, we offer that too—because protecting what you’ve built should include more than just your business.
Next Up:
Forming a business with more than one owner? We’re talking about how to structure a multi-member LLC to avoid drama, deadlock, and unforced errors from the start.
