Buy/Sell Agreements: Protecting Your Business and Your Family

Most business owners insure the premises, the stock, and the equipment. Far fewer insure the people the business actually depends on: themselves, their co-owners, or other key decision-makers.

Only 19% of Australian family businesses have a documented succession plan, and research cited by PwC suggests around 70% of business and wealth transfers fail between generations. Most owners plan for cash flow, tax, and growth, but few plan for what happens if a key owner is suddenly gone.

If a critical illness took you or a partner out of the business, how would you keep the lights on and staff paid? If you died or became permanently disabled tomorrow, is there an agreement, with enough money behind it, to make sure your family gets the value of what you have built?

The gap most owners do not see coming

Without a funded agreement, a surviving partner is usually left either running the business alongside someone who was never part of the plan (a grieving spouse, an adult child, the deceased’s estate) or buying out that share at short notice without the capital to do it cleanly. That often means personal debt or a fire-sale valuation.

Nearly half of Australia’s Baby Boomer business owners plan to exit within five years, yet only around a quarter have a documented plan, and a third are relying on the sale of the business to fund retirement. That is a lot of value being left to chance.

What a buy/sell agreement actually does

A buy/sell agreement sets out, in advance, what happens to each owner’s share if they die, become permanently disabled, or suffer a critical illness: when a sale is triggered, how the business is valued, and who buys and is paid, on what terms.

On its own, that is just a plan. The crucial step is funding it. Life, TPD or trauma cover can provide the lump sum needed at the time, so the surviving owner can buy the departing owner’s share at an agreed value, and their family is paid out fairly without needing to stay involved in a business they may have no interest in running.

“But what if I am a sole owner?”

If you run your own practice, you will not have a buy/sell agreement in the traditional sense. You still need a version of this thinking: identifying who is likely to buy your business or client book, documenting how that sale would work, and funding it so your estate can negotiate a fair sale rather than accepting the first low offer.

This “successor strategy” can be the difference between your family receiving real value, or the goodwill simply disappearing.

Linking your buy/sell to your estate plan

For many owners, the business is one of the biggest assets in their estate, which means finding a way to treat family members fairly when some are involved in the business and others are not.

A well-structured buy/sell arrangement can:

• turn your equity into cash for your estate at an agreed value
• let a child or partner who works in the business keep running it
• use insurance proceeds to provide for family members who are not involved

Instead of your family inheriting a complex, illiquid asset they are not equipped to manage, they can inherit either a stable business in the right hands, or the value of your interest in it, clearly defined and funded.

Worth asking yourself

• If your business partner died tomorrow, do you know exactly what happens next?
• Is there actual capital behind your buy/sell agreement, or just the document itself?
• Does your estate plan clearly show who ends up with the business, and who receives the value of your share if they are not involved?

This is not just about legal documents. It is about making sure the value of what you have built can be realised and passed on the way you intend. That is exactly the planning we help clients put in place.

Our next article looks at the other side of the same risk: key person insurance, and keeping the doors open when a key individual is suddenly not there.

Sources:

• Grant Thornton Australia, The Succession Planning Gap in Family Businesses (2025 Family Business Report), 2025
• PwC Australia, How Family Businesses Can Safely Hand Over to the Next Generation (citing Williams & Preisser, Preparing Heirs), Family Business Survey
• Scale Suite, The Succession Wave: Business Owner Retirement Data, compiled from ABS and MYOB data, 2026