If you are in business with a partner, the day may come when you need to discuss how to exit the business. Conversations like this can go in many different directions. Generally speaking, the work completed (or lack thereof) when the company was created will directly impact the amount of work that must be completed when the company dissolves or its structure changes. Many small businesses are formed informally without shareholder agreements, exit strategies or written expectations of each participant’s responsibilities. The lack of structure and planning at the onset of a company will result in business partners having to work through details when they decide to buy each other out. Because expectations are often unclear, valuation methods used to determine payout amounts can be biased, and communication can become cordial and frustrating. One of the easiest ways to buy out a business partner is to look back at the history of the business, how the partners were each participating and then have a frank conversation about what is reasonable and fair for everyone involved. This approach doesn’t mean everyone gets what they want, but common sense might enable a speedier outcome than what might have been realized otherwise. Getting caught up in details that were not part of how a company was formed or managed can be challenging to impose when the company needs to change. History can be a good reference point for setting a future course of action.
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Some thoughts on buying out a business partner
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