A buy-sell agreement is a legally binding agreement between the co-owners of a business. It is sometimes referred to as a buyout agreement. A buy-sell agreement governs the situation if a co-owner dies, is forced to leave the business, or chooses to leave the business. It is a prenuptial agreement between a company's business partners and shareholders—sometimes called a "business will."

1. Cross-purchase plan: In a cross-purchase plan, each business owner buys a life insurance policy on the other owner or owners. If one of the owners passes away, the surviving owners use the death benefit to buy the deceased owner's share of the business. 
2. Hybrid plan: A hybrid buy-sell plan combines cross-purchase and entity redemption agreements. It gives the company the first option to purchase a deceased owner's share, followed by other owners or key employees. This plan helps maintain a stable leadership team and provides financial incentives for key employees to remain with the company.

Buy-sell agreements are important for businesses because they provide a plan for what happens if one of the owners becomes disabled or passes away. These agreements outline how the business ownership will be transferred and who will take over, ensuring the business can continue to operate without disruption.