What are the two types of partnership buy-sell agreements?

The two types of partnership buy-sell agreements are the cross-purchase plan and the entity plan. In a cross-purchase plan, each partner agrees to buy the interest of a deceased partner directly, ensuring that the remaining partners can maintain control of the business without bringing in outside parties. This type of agreement is particularly beneficial in smaller partnerships where there are a limited number of partners.

On the other hand, in an entity plan (also known as a stock redemption plan), the business itself agrees to buy the interest of a deceased partner. This structure allows the partnership or corporation to maintain ownership within the entity, providing a streamlined process for transferring ownership.

These two types represent fundamental strategies partners can use to manage ownership transitions, ensuring business continuity while addressing issues related to the death or departure of a partner.