Mississippi Life and Health Insurance Practice Test

The arrangement that ensures shares can be bought and sold among business owners in the event of death or disability is known as a buy-sell agreement. This legal contract is established to provide a clear process for the remaining business owners to purchase the shares of a deceased or disabled partner. The buy-sell agreement sets the terms for the sale, including the price or valuation method, which helps prevent disputes and provides financial security.

In practice, this agreement is vital for maintaining continuity and stability in the business, as it allows for an orderly transfer of ownership and avoids the potential complications that may arise if one owner were to pass away or become incapacitated. This mechanism ultimately protects both the business and the interests of the surviving owners, ensuring that they can maintain control and that the business can continue to operate effectively without unnecessary disruptions.