A Texas buy-sell agreement should answer five questions before they become a dispute: what events force or allow a buyout, how the ownership interest is valued, how the buyout is paid for, who may buy, and what happens when an outside buyer appears. Texas also requires attention to community property, which many template agreements ignore.
What events should trigger a buyout?
The usual list is death, disability, divorce, departure, and deadlock. Also consider retirement, termination for cause, loss of a professional license, personal bankruptcy, and an attempted transfer to an outsider. For each event, the agreement should say whether the buyout is mandatory or optional, and who has the right or duty to buy: the company, the other owners, or both.
How should the business be valued?
This is the clause most often litigated. Common approaches:
| Method | Advantage | Risk |
|---|---|---|
| Fixed price, updated annually | Simple and certain | Goes stale when owners forget to update it |
| Formula, e.g. a multiple of earnings | Predictable | Can be wildly off in a good or bad year |
| Independent appraisal | Reflects current value | Costly; disputes over the appraiser and assumptions |
Whatever method you choose, decide in advance whether minority and marketability discounts apply. That single choice can change the price substantially.
How will the buyout be funded?
An obligation to buy is worthless if no one can afford it. Life and disability insurance can fund death and disability buyouts. For other events, agreements often allow payment over several years with a promissory note, interest and security.
What are tag-along and drag-along rights?
They govern what happens when an outside buyer wants the company.
- Tag-along rights protect minority owners. If the majority sells, the minority can join the sale on the same price and terms.
- Drag-along rights protect the majority. If owners holding a set percentage agree to sell, they can require the minority to sell too, so one holdout can’t block a deal.
A right of first refusal lets existing owners match any outside offer before an owner sells to a stranger.
Why does Texas community property matter?
In Texas, an ownership interest acquired during marriage is presumptively community property. If an owner divorces, the spouse may be awarded part of the interest. A good buy-sell agreement gives the company or other owners the right to buy back any interest awarded to a spouse. It should also be signed by owners’ spouses, acknowledging the terms.
Can we add a buy-sell agreement to an existing business?
Yes, and it is far easier while everyone still gets along. The terms can sit in your company agreement, shareholders’ agreement or partnership agreement, or in a stand-alone document.
From our case files
- Valuation decides the fight. In a 2025 founder buyout, the departing member demanded roughly three times what he ultimately received. The buyout settled in the upper six figures, leaving our client as sole owner.
- Buyout terms matter as much as price. In a crypto exchange business divorce, our client was bought out for six figures without the onerous non-competition restrictions the other shareholder first demanded (2025).
- Structured buyout of a founder. We pursued a suit against a founding shareholder that ended in a negotiated, structured buyout (2014).
Client names are withheld for confidentiality. Every case turns on its own facts, and past results do not guarantee a similar outcome. See more representative results.
The Burk Law Firm drafts buy-sell provisions with a litigator’s eye for how they’ll be tested. Call (512) 306-9828.
Related: How Do You Split Up With a Business Partner in Texas? · What Should a Texas LLC Company Agreement Include?
This article is general information, not legal advice. Reading it does not create an attorney-client relationship.