I Want to Buy Out My Business Partner. What Should I Do?

If you’ve decided it’s time to call it quits with your business partner for reasons that may be good, bad, or ugly, there are some important steps you need to take to ensure a smooth and successful dissolution of the business partnership. 

First, look to your shareholders’ agreement.

The partnership agreement you created at the outset of your business venture should also detail an exit strategy. What have you and your partner determined in regards to the terms of a business dissolution or the departure (or death) of a partner?

If you don’t have an agreement, things can get trickier, but not impossible. While you can’t force another shareholder to sell their shares, you may be able to negotiate something out of court. If you can’t, things will get expensive…fast, and you’ll want to hire an experienced business attorney as soon as possible. 

Next, get a business valuation. 

To buy out a partner, you need to determine a fair price. Hire an independent valuation firm to conduct a formal business valuation. 

In addition to assessing the valuation, consider also how essential your partner’s expertise and industry relationships are to the success of your business. What kind of impact will there be to your business without the presence of a specific partner?

Reassess your business goals. 

Before proceeding with a buyout, it’s important to step back and consider your overall goals and motivations for pursuing it. It will be an expensive undertaking and you may need to seek outside financing to fund the buyout. Determine whether the buyout is your best choice or if there are alternatives that may make more sense for your goals and situation.

Hire a Commercial Lawyer

The stakes of a buyout are too high to go it alone, even if it is an amicable split. Hire an experienced acquisitions attorney to help you negotiate the buyout deal. The cost of doing so – and ensuring that it is done correctly – far outweigh the expenses and headache that are sure to come if the buyout is mishandled.

At Silveberg|Brito, PLCC, our commercial law team works side-by-side with our clients. We pride ourselves on thinking outside the box and not only finding the best strategies for our clients, but also following through on those solutions through world-class communication, innovation, and commitment. Get in touch to schedule a consultation.

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