All partnerships end eventually. There are a variety of reasons. An inability to agree on the direction of the business. The desire of one partner to retire, or move on, or take on a new opportunity.
Not all of the reasons are contentious, but the process of buying out a partner can become contentious, even if your partner is willing to sell. They’re also complex legal processes.
Here are the steps you’ll need to take to get the job done.
Figure Out Financing
You need to make sure you are going to have the resources to complete the buyout. The last thing you want to do is negotiate a buy-sell agreement only to find out you can’t live up to your end of the bargain.
Get Legal Help
Both you and your partner need your own attorneys. Both attorneys should have a grounding in New York mergers and acquisition laws.
Even if the buyout is amicable, you’ll be creating legally binding agreements that determine the future of the business and its assets.
Examine Existing Agreements
Look to your existing partnership agreement. For example, you may be able to dissolve the partnership without buying out the other person, though in many cases this would also close the business.
You also need to examine your existing operating agreement to see if there are any terms within these existing contracts that will impact your buyout.
Hire a Valuation Expert
Many partnership buyouts go sour due to disagreements about what the business is actually worth. These disagreements are avoidable.
You need to get a certified valuation expert to get the current value of your company so you can make a fair offer and so both you and your partner are on the same page. This can reduce disagreements as the worth of the business, and thus the partner’s share, will be right there in black and white.
Negotiate the Buy-Sell Agreement
The buy-sell agreement is a legal agreement and a binding contract, and outlines the responsibilities of both parties.
For example if you want to make sure your business partner doesn’t just turn around and start a competing business, that would need to be in the buy-sell. If your partner came up with the logo and slogan you’ll need to specify that you’ll retain the right to use them.
Try to stay as amicable as possible. Try to be fair to your partner, even if the relationship has gone sour. Be prepared to negotiate. Try to keep emotion out of the process.
Final Steps
Determine whether you need to change your business structure after completing the buyout. Your attorney can help with this.
Get Help Today
No matter where you are in the lifecycle of your business, the attorneys at Stone, Studin, Young, and Nigro can help. Contact us to set up a consultation if you need an attorney to help you negotiate a buyout.
See also:
When Do You Need a Long Island Business Lawyer?