Cross Purchase Buy Sell Agreement

Cross Purchase Buy Sell Agreement is where business owners agree among themselves to collectively purchase the interest of any owner who dies. Using life insurance policies on each other to fund the buyout, each business owner buys a life insurance policy on all the other owners. At the death of an owner, the surviving owners receive policy proceeds and then purchase a pro rata share of the deceased owner’s business interest from his or her estate. The result is that the estate’s non-liquid business interest is converted into cash and the surviving owners now own 100 percent of the business.