Help with a Voluntary Exit from Your Partnership (Buyout)

Cut the Stress. If Your Partnership Cannot Be Fixed, Get Help Negotiating a Voluntary Redemption of Your Interest.

Buyout

When you feel like your situation is hopeless and you need to get out of your partnership, get advice before you start talking with your partner about leaving the business. If the partnership has soured, your partner may be happy that you have decided to leave. Under those circumstances, you probably aren’t going to get much for your interest. The bigger problem may be your on-going responsibility for taxes and other liabilities. Taking $1 for your interest doesn’t free you from the obligations incurred when you signed the lease and if the business fails later, you could get a bill for the balance left on the lease.

The first step in getting out of the business is to review your Operating and Partnership Agreements. If those were never drafted, you still want to gather all the information on everything you signed with an obligation. That includes leases, lines of credit, credit cards, and any other debt that the partnership took on. It’s not about getting your partner to agree to assume your portion of the debt; the creditors must agree to release you. This can be the hardest part of getting out of a relatively young business. If the business has a decent track record of paying bills, the creditors are more likely to agree to your release.

We Have No Money for a Buyout? No Problem. There Are Other Solutions.

There is usually a cash shortage to fund a buyout when the partners are feuding. It is also very difficult to raise money for a buyout because investors don’t like to see their money leave the business. But there are lots of workable alternatives to buyout. If a buyout is necessary because the parties cannot reconcile, we can figure out secure, creative financing that will work in even the toughest situations. The most important thing is to stay calm and positive. Don’t make threats. Don’t walk away. Don’t harm the business.

There are alternatives to buying each other out.

A buyout isn’t the only answer. Often we can find ways to help get the partnership operating smoothly. In many cases, a stressed partnership can be worked into a civil, functional and profitable relationship. Sometimes that is as simple as restructuring responsibilities and getting written agreements in place. Sometimes a business can be divided.

If the situation is very bad, it may be best if the partnership is dissolved and the business liquidated. That’s harsh but it may be your best option. There are some situations where a client should dissolve the business to prevent a future exposure.

Act While You Can

If you act while it’s still possible to talk with your partner and before the business gets into trouble, you might reach a decent agreement. If you burn out and stop participating in the business, you could lose your interest if the case goes to court. It’s always better to avoid the fight rather than be subject to any risk. Anything can happen in court.

Where Do You Start?

Get advice. Once the reality of your position is sorted out, you can make an offer to your partner and open negotiations for your voluntary redemption of interests.

Cost?

My rates are a fraction of the cost of getting attorneys involved. Once an agreement has been reached, you can have a lawyer review it. That’s cheaper for all concerned.

If you are in a partnership and need to get out, call me for a free, no pressure, no obligation, consultation. Even if we don’t end up working together, you will feel a lot better after we talk.

Chris  (530) 467-5690