What is a 'buy-sell agreement' commonly used for in a partnership?

A buy-sell agreement is a critical tool in a partnership, specifically designed to outline the process of ownership transfer in the event that a partner leaves the business or passes away. This agreement helps ensure that the remaining partners are able to buy out the departing partner’s share or that the shares are transferred according to pre-agreed terms. By having this arrangement in place, it minimizes disputes and uncertainties related to ownership changes, thereby providing stability and clarity for the partnership.

In contrast, distributing daily profits, managing employee benefits, and determining price setting for services do not address the specific needs of ownership transfer. Those functions are typically handled through other agreements or operational protocols rather than a buy-sell agreement, which is specifically focused on managing the transitions of partnership ownership.