An agreement that establishes a price for assets of a business in case one party predeceases the other is known as what?

A buy-sell agreement is a legally binding contract that outlines the terms and conditions under which the ownership of a business will be transferred in the event that one of the owners passes away or becomes incapacitated. This agreement is crucial for businesses with multiple owners, as it ensures that the remaining partners can buy out the deceased partner's share, preventing unwanted outsiders from acquiring an interest in the business. By establishing a predetermined price for the business assets, it provides clarity and financial stability to the surviving partners and the estate of the deceased owner.

In contrast, a partnership agreement primarily governs the relationships and roles among partners, but it may not specifically address buyouts related to death or incapacitation. An estate plan is broader in scope, focusing on the distribution of an individual's assets upon death, rather than specifically addressing business ownership transitions. An asset transfer agreement typically refers to the transfer of ownership of specific assets rather than the comprehensive provisions and valuation methods associated with business ownership addressed in a buy-sell agreement. This specificity is what makes the buy-sell agreement the most appropriate choice in this context.