Before I answer, I need to say that this is merely an opinion of my own, to which I am offering as an answer to your question. Moreover, answering this question does not create an attorney-client relationship of any sort. Should you be in need of legal assistance in this matter or any other, please contact me privately. --It is common, for a number of reasons, but if this is something you are considering I suggest you consider the pros and cons of such an agreement. 1. Lower up front cost to the buyer Of course with an installment plan the buyer owes a lower amount at the outset of the agreement. Surely an enticing component of installment payments. 2. Buyer can pay through the profits of the business Decreasing the amount owed by the buyer can be the incorporation of a provision stipulating that payment for the shares is to be first taken from the profits of the company. In other words, the buyer can put the distributions he/she is entitled toward payment of the outstanding balance owed for the shares purchased. Another enticing component if it is included. 3. Interest It is standard practice to incorporate interest into the payment. Much like banks have interest on loans, the seller can do the same. The seller is in essence playing the role of the bank in these cases, since they are allowing the seller to use their money (in the form of equity). Interest rates may increase the amount paid over the course of the installment plan, but if you keep reading you'll see it's not all sunshine and daisies with these types of agreements. 4. Seller doesn't have access to a large sum of money right away This is particularly beneficial if the seller is a little trigger happy with their wallets. Having a lower amount come in on a monthly (or whatever timeline you agree to) basis will create a limitation on the spending of the seller and also pra steady paycheck for months and years to come. Definitely a perk of the installment payments. On the other hand however are the cons, which are often overlooked. 1. Inflation Inflation is a fundamental inhibitor of getting exactly what you had bargained for in the purchase and sale of stock. Fair market value (FMV) of the shares may total $500,000 today, but with inflation added to the equation, this $500,000 will decrease in value over the course of the installment plan. You can avoid this pitfall by agreeing to a higher down payment up front and a shorter installment plan. Nevertheless, factoring in inflation is vital to ensure you aren't getting the short end of the stick. 2. Liability Just because you've sold your stock doesn't mean you're off the hook for business debts and liabilities. It is routine for banks to require a personal guarantee from a business owner in exchange for the loan or LOC. If this is not repaid, you are on the hook even if you are no longer affiliated with the business. You can avoid this by requesting a release of liability from the lenders and also include an indemnification provision in the buy-sell agreement that stipulates the company or other shareholder(s) will compensate you for any expenses incurred due to debts or liabilities of the company for which you were an original personal guarantor. 3. Taxation This is a biggie. What most people think at first glance is that an installment plan keeps your taxes at bay more than a lump sum payment would. This is true, to an extent, but also drastically misinforming. There are three events that occur through an installment plan as incorporated in a purchase and sale of stock agreement. Return to basis: This is a tax-free event that restores the amount you initially bought in at. EG. You invested $2,000 and received 500 shares. You sell those 500 shares for $3,000. $2,000 of that sale is tax-free since it brings your basis back to $0. The remaining $1,000 is treated as what's known as capital gains. Capital gains: The excess amount you receive after your return to a basis of $0 is taxed as a positive return on your investment. The $1,000 from the hypo above would be subject to capital gains tax. The cap gains tax is commonplace in a purchase and sale of stock, but this is not where the issues of taxation lie, it's in the last event. Interest treated as ordinary income: As mentioned above, it is common to charge interest for the usage of your assets in the purchase and sale of your stock. The interest, however, is treated as ordinary income and thus will be subject to state and federal taxation.You can avoid the added tax from the interest rates by simply agreeing to a lump sum payment. This additional tax adds up over time and ends up making a pretty big difference over what you are paid and what you're entitled to over the course of the installment plan. 4. Funding the agreement There is always the possibility that the buyer or the company are going to run out of assets to pay for the stocks. Projections of future P&E are nothing more than speculative. This needs to be considered before agreeing to allow the buyer to use his distributions of company profits to pay off the amount owed. What if the buyer can't afford it anymore, or worse, dies before the balance is paid off? Another vital factor to consider before agreeing to an installment plan. You can avoid this by getting a personal guarantee from the buyer, just like the banks do. If he/she is unable to pay, you are able to attach to their assets that are not otherwise affiliated with the transaction. Another alternative would be to fund the agreement through a life insurance policy. This protects the seller in the event the buyer dies and saves any awkward conversations with their estate/heirs/etc. I am an attorney at The Janus Law Group, P.A. (Janus Law Group | Business and Real Estate Counsel |and handle matters such as this for clients across the United States. Feel free to reach out if you have any additional questions or concerns.