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3 important steps if you plan to buy out your business partner

Business partnerships don’t always last as long as the companies that partners start together. Maybe you have had personal conflicts that make working together a struggle. Perhaps your partner wants to retire or move on to work in a different industry. Perhaps you have big plans for the company, but you need sole control of the business to pursue your new idea.

If you want to dissolve our partnership or buy out your partner, there are some important steps that you need to take before you sit down to have that conversation.

Review your partnership agreement and business plan

The documents the two of you drafted when you first started the company could play a significant role during the end of your formal business relationship with one another. You may already have rules in place regarding the division of your business or a buyout.

Going back over your documents will help ensure that you take the right approach while planning this transition and could remind you of special conditions or terms you agreed to when you started the company.

Put a price on the business

Putting an appropriate value on the company is a key component to a successful partnership dissolution. You need to have a realistic idea of what the company is currently worth and then look at the big picture, including the business’s financial obligations and likely future revenue.

After all, you will not be able to make a reasonable offer based on the fair market value of your company if you don’t perform a thorough business valuation. Keeping the records of how you arrived at the final figure will be important if your partner questions your offer.

You must address the impact of your partner leaving

If you want to buy your partner out because of an interpersonal dispute, the risk is there for them to immediately turn around and create a competing business, possibly approaching the clients and customers you rely on and diminishing your company’s market share. You may need to consider adding non-solicitation or non-compete clauses to your buyout or dissolution paperwork to protect yourself and the company.

Preparing carefully when considering major business transitions will increase your chances of success.