When Business Partners Go Their Own Way
Business partners move on from one another for a variety of reasons. If you and your business partner were married and have decided to divorce, it may be necessary for one of you to leave the business. If you or your partner has reached an older age and wishes to retire, you need to figure out how the retiree will move on in life and what that means for the business. It may also just be that you and your partner no longer agree on how to run the business. You may have naturally come to a point where it is time for one of you to move onto a new venture and the other to take over the business.
If you and your partner have decided it is time to part ways, or one of you believes the other should be forced out of the business, don’t hesitate to contact an experienced business attorney as soon as possible.
Review the Partnership Agreement
If you and your partner were prepared when you began your business, then there should be a dissolution strategy laid out in your partnership agreement. It should define what is to happen in the case of one partner amicably leaving for various reasons, such as retirement. It should also determine what happens if one partner wants to force out the other.
Various options partners use to end their arrangement include:
- Dissolving the partnership and ending the business venture,
- One partner buying out the other’s ownership stake,
- The parting individual selling his or her stake in the business to a third party, or
- Modifying the partnership agreement for the departing partner to take a silent role in the business, giving the other partner primary control and liability.
Speak With an Attorney
Whether you are the partner staying or going, you need to contact an experienced business lawyer right away. Even if your partnership agreement is relatively clear, there will be a number of terms to negotiate. If you do not have a dissolution strategy within your partnership agreement, then it is even more essential you have a lawyer who will protect your rights as a business owner and ensure you are not taken advantage of during this split.
Value the Business
When one partner leaves, voluntarily or not, the process typically involves a buy out of their ownership interest. For a buyout to move forward, you and your partner must obtain and up-to-date business valuation. Again, refer back to your partnership agreement. If the agreement states the type of valuation method that is to be used, then this process may go smoothly. However, if you and your partner did not discuss the type of valuation method in the past, then this may be a contentious issue.
Other Terms to Negotiate
Even with a solid dissolution strategy in place, there will be a number of factors to negotiate. An important issue is the timeline for your or the other partner’s exit. When is the official last day and how will that partner’s responsibilities be allocated to others?
Another issue is how you or the other partner will be bought out? Do you receive a lump sum payment? Or will you receive payments over a specific period of time?
Contact a West Palm Beach Business Lawyer
If you believe it is time to leave your current partnership or it is time for one of your partners to go, then contact the Law Offices of Larry E. Bray, P.A. in West Palm Beach at 561-571-8970 to schedule a consultation. You need a highly experienced business transactions and litigation attorney to help you navigate this major business decision and life change.