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How can you prepare to buy out your business partner?

On Behalf of | Sep 1, 2022 | Business Formation |

A business partner can be like a spouse. The two of you combine your resources and try to build something new and special that is valuable to both of you. You have some responsibility to one another and can massively influence one another’s financial or legal situations.

When partners truly share the same values and goals, they may work together until they are ready to retire or sell the business. Occasionally, business partnerships reach a point where they are no longer viable. Maybe you want to change the scope of the company or move on to a different industry. Perhaps there are simply interpersonal issues that affect your ability to run the company together.

You may have decided that you want to buy out your partner. How can you prepare to make them an offer?

Review your business plan and partnership agreement

You may already have agreed to specific procedures for a partner buyout when you started the company. The longer you have been in business, the more likely it is that you don’t remember all of the details of your original contract.

Reviewing both your business plan and your partnership agreement can help you determine if there are already agreements that will assist with the buyout process. If there are, then those terms should guide the next steps you take.

Conduct a thorough business valuation

If you want to make an offer that your partner will accept without much dispute or negotiation, you need to make it attractive to them. Having a realistic understanding of what the business is worth will be critical when making an offer to them for buyout purposes. A thorough business valuation and the documentation that helps you suck a specific value will play an important role in your negotiations.

Try to settle things amicably, if possible

The last thing you want is for a messy dispute to lead to litigation. Not only will litigation potentially waste thousands of dollars of company assets, but it could also damage the reputation of the business. Discussing the matter openly with your partner once you are ready to broach the topic could lead to an amicable parting of ways as opposed to a contentious and ongoing dispute.

The more you plan before taking action, the better your chances of securing the best outcome for your buyout offer. Taking the right steps when planning a major business transaction like a partner buyout will increase your chances of success.