Which disability buy-sell agreement is most suitable for ABC Partnership, which has a limited number of partners?

In a partnership setting such as ABC Partnership, a cross-purchase agreement is particularly suitable when the partnership comprises a limited number of partners. This type of agreement allows each partner to purchase the share of a partner who becomes disabled and is unable to continue working.

With a limited number of partners, the cross-purchase agreement streamlines the buy-sell process, as each partner is directly involved in purchasing the interest of their disabled counterpart. This not only simplifies the financial transactions but also ensures that the remaining partners maintain control over the partnership and its operations. Each partner has the responsibility to insure themselves and their share, which helps in managing risks associated with disability.

In contrast, the entity purchase agreement generally involves a situation where the partnership itself is the buyer, pooling the disability benefits to buy out a disabled partner’s share. While this can work in larger groups or partnerships, it may be less efficient for a smaller partnership, where individual ownership and responsibilities are clearer.

The wait-and-see agreement offers more flexibility by providing options for both entity and cross-purchase arrangements, but in a situation with only a few partners, the straightforward nature of the cross-purchase agreement typically fits better.

An option agreement typically allows for more varied arrangements, which might not be necessary or