Houston Buy-Sell Agreement Attorneys Serving Texas Businesses

When a business partner dies, divorces, goes bankrupt, or simply wants out, your company's future should not be decided by a court or a default rule buried in the Texas Business Organizations Code. Our Houston-based attorneys draft, review, and enforce buy-sell agreements for closely held businesses of every entity type – LLCs, corporations, and partnerships – throughout Texas. We have been doing this since 1987.

On This Page:

• What Is a Buy-Sell Agreement?
• What Events Trigger a Buy-Sell Agreement – and What Happens Without One?
• Who Needs a Buy-Sell Agreement?
• Buy-Sell Agreements and Business Valuation
• How Buy-Sell Agreements Fund a Buyout
• When Buy-Sell Agreement Disputes Arise
• Is a Buy-Sell Agreement Legally Enforceable in Texas?
• Types of Buy-Sell Agreements We Handle
• Frequently Asked Questions

Whether you are forming a new partnership, updating an agreement that no longer reflects your business, or navigating a buyout dispute, the buy-sell agreement attorneys at Hendershot Cowart P.C. are ready to help. Call (713) 783-3110 today.

What Is a Buy-Sell Agreement?

A buy-sell agreement, also known as a buyout agreement, is a legally binding contract among co-owners of a business – such as partners in a partnership, shareholders in a corporation, or members in a limited liability company (LLC) – that governs what happens to an owner's interest when a triggering event occurs. 

A buy-sell agreement provides three key benefits:

1. It controls who can own an interest in your business. The agreement restricts the transfer of ownership so that co-owners never find themselves in business with an unwanted partner – such as a deceased owner's heir, a divorcing spouse, or a bankruptcy trustee.
2. It establishes how ownership interests will be valued. The agreement specifies the method for pricing a departing owner's interest, preventing costly disputes at the moment a buyout becomes necessary.
3. It defines the process and funding for a buyout. The agreement sets out how and when a purchase must be completed, and how it will be financed.

Think of a buy-sell agreement as a prenuptial agreement for your business partnership – establishing clear rules for ownership transitions before a dispute, departure, or crisis makes those conversations far more difficult.

What Events Trigger a Buy-Sell Agreement – and What Happens Without One?

A well-drafted buy-sell agreement addresses the following triggering events:

• Death of an owner
• Disability or long-term incapacity
• Retirement or voluntary departure
• Divorce – particularly important in Texas, a community property state, where a spouse may become entitled to an ownership interest
• Bankruptcy or insolvency of an owner
• Termination of employment (when the owner is also an employee)
• Deadlock or irresolvable disagreement among co-owners
• A desire to bring in a new owner or sell the business to a third party

Without a buy-sell agreement, any of these events can transfer an ownership interest to someone the remaining owners never chose – a deceased owner's heir, a divorcing spouse, or a bankruptcy trustee. They can also trigger prolonged disputes over valuation, voting rights, and control that end in costly litigation or a forced sale. 

Who Needs a Buy-Sell Agreement?

Any business with more than one owner should have a buy-sell agreement – regardless of entity type and regardless of how well co-owners currently get along.

Buy-sell agreements are especially important for:

• Closely held businesses where ownership interests represent significant personal wealth
• Family businesses where death, divorce, or disagreement can complicate both personal and professional relationships
• Professional practices such as medical, dental, and law firm partnerships, where licensing considerations create unique valuation and transfer issues
• Businesses with unequal ownership where minority owners need exit rights and majority owners need transfer controls

If you are unsure whether your current governing documents adequately address ownership transitions, contact our attorneys to review them.

Buy-Sell Agreements and Business Valuation

Texas businesses commonly use one or more of the following valuation methods in their buy-sell agreements:

• Agreed fixed price – Owners set a value periodically by mutual consent. The catch: if owners fail to update the price on schedule, the stated figure may be outdated and unfair. Agreements using this method should always include a backup valuation approach that activates when updates lapse. 
• Third-party appraisal – An independent business valuation expert determines fair market value. Your buy-sell agreement can even designate a specific valuation firm to conduct an appraisal if and when the need arises.
• Push-pull provisions – One partner names a price; the other chooses to buy or sell at that price
• Formula-based valuation – Value is determined by a calculation tied to net earnings, revenues, book value, or cash flow. Some valuation provisions require mutual agreement with a fallback appraisal method if the parties cannot reach consensus.

Because every business has a unique mix of assets, liabilities, and income sources, no single method works for every situation. Our attorneys help business owners evaluate the options and select the approach that best fits their structure and goals.

How Buy-Sell Agreements Fund a Buyout

When a buyout is triggered, where does the money come from? Without a pre-established funding plan, even a willing buyer may lack the liquidity to complete the transaction. 

Common funding mechanisms include:

• Life insurance-funded buy-sell agreements – A life insurance policy on each owner provides immediate funds to the surviving partners upon an owner's death, one of the most widely used structures for Texas businesses
• Disability buyout insurance – Similar to life insurance funding, but activated by an owner's long-term disability rather than death
• Sinking funds – A portion of business profits is set aside over time to build a dedicated buyout reserve
• Installment payments – The purchase price is paid in structured installments, reducing the immediate cash burden on the buyer

When Buy-Sell Agreement Disputes Arise

Even well-drafted buy-sell agreements can become the subject of disputes – over valuation, over whether a triggering event has occurred, or over whether a party's obligations are enforceable.

Our attorneys represent both buyers and sellers in buy-sell agreement disputes, including:

• Challenges to a business valuation method or appraisal result
• Disputes over whether a triggering event has been properly invoked
• Enforcement actions when a party refuses to complete a buyout

Texas courts treat buy-sell agreements as contracts and enforce their plain language. A 2026 decision by the Texas Business Court makes clear just how strictly. In Crain v. Northern (Texas Business Court, 8th Division, February 2026), the court granted specific performance of a mandatory buy-sell option clause between two 50/50 LLC members. When one member failed to respond to the other's buy-sell notice within the 30-day contractual window, the court held that his silence was conclusively deemed an election to sell – no exceptions, no equitable relief for inaction. 

That strict, plain-language enforcement cuts both ways: It protects the partner who properly invokes a buy-sell provision. It also means that a party who ignores a notice, misses a deadline, or fails to follow the agreement's procedures may forfeit rights they cannot recover. This is why having experienced partner and shareholder dispute representation is critical, whether you are asserting your rights or defending them. If a buy-sell dispute is already in progress, contact our attorneys today.

Is a Buy-Sell Agreement Legally Enforceable in Texas?

Yes. Texas courts treat buy-sell agreements as enforceable contracts, governed by general principles of contract law. Texas Business Organizations Code expressly permits corporations to adopt agreements restricting the transfer of shares.

That said, the enforceability of your agreement depends heavily on how it is drafted. Ambiguous valuation provisions, undefined triggering events, and missing funding mechanisms are among the most common – and most expensive – drafting failures. Our attorneys draft buy-sell agreements with the precision Texas courts require.

Types of Buy-Sell Agreements We Handle

Buy-sell agreements are not one-size-fits-all. Our attorneys work with a wide range of business structures and industries, including:

• LLC buy-sell agreements – Governing membership interest transfers when a member exits, retires, or passes away
• Partnership buy-sell agreements – Protecting general and limited partners from unwanted ownership changes
• Shareholder buy-sell agreements – Addressing stock transfers in closely held Texas corporations
• Medical and dental practice buy-sell agreements – Navigating the unique licensing and valuation issues that arise in professional practices
• Law firm buyout agreements – Structuring attorney departures and equity transitions

Buy-Sell Agreement Frequently Asked Questions

What is the difference between a buy-sell agreement and a right of first refusal?

A buy-sell agreement imposes mutual obligations: if a triggering event occurs, the departing owner must sell, and the remaining owners or entity must buy. A right of first refusal gives remaining owners the option to purchase, but does not require them to do so. 

Do I need a buy-sell agreement for my LLC?

Yes. LLC operating agreements do not always address what happens when a member wants to leave, becomes incapacitated, or dies. A separate buy-sell agreement – or buy-sell provisions incorporated into your operating agreement – ensures your LLC has a clear, enforceable plan.

What professionals are involved in drafting a buy-sell agreement?

Buy-sell agreements typically require three types of professionals working in coordination: a business attorney to draft and review the agreement; a CPA or business valuation expert to establish or review the valuation method; and a financial advisor or insurance professional to structure the funding mechanism – particularly if you plan to use life insurance to fund a buyout on death. 

At Hendershot Cowart P.C., we coordinate with your existing advisors or can refer you to trusted professionals who work with Texas businesses.

How does divorce affect a business partnership in Texas?

In a community property state like Texas, a co-owner's spouse may be entitled to a share of the business in a divorce proceeding. A properly drafted buy-sell agreement addresses this directly – specifying whether the spouse will be permitted to maintain that interest or whether they must sell it back to the remaining owners. Without this protection, a divorce can introduce an unwanted co-owner into your business.

How does an owner's bankruptcy affect the business?

The bankruptcy of one owner may put that owner's business interest at risk of being sold to satisfy creditors. A buy-sell agreement should specify what happens if a member or shareholder files for bankruptcy – typically requiring that the business interest be offered to the remaining owners before it can pass to a bankruptcy trustee or creditor.

Contact Our Houston Buy-Sell Agreement Attorneys

Our buy-sell agreement attorneys serve clients throughout Texas and the Houston area – including The Woodlands, Katy, Sugar Land, Cypress, San Antonio, Austin, Fort Worth, and Dallas. Whether you need a new buyout agreement, an update to an existing one, or legal counsel in an active buyout dispute, we can help.

Contact Hendershot Cowart P.C. at (713) 783-3110 to schedule your consultation.