Navigating The Tricky Process Of Buying Out A Business Partner

Do you think it might be time to end your current business partnership? In our last blog, we listed a few signs that may indicate the time has come for you to go solo. They included having different visions of the company’s future, unequal contributions to the brand and constant arguing. If you’ve come to the point where you’re ready to buy out your business partner, you’ll need to prepare for a tricky process. Allow us to help you through it.

Assess your financial ability to execute the split.

You got in this business together for a reason. Perhaps, it was easier to afford the launch of a new company when you split the costs in two. Now that you plan on splitting up, can you afford to run the business on your own? Firstly, you’ll need to calculate how much it will cost to buy your partner’s share. To do this, you must conduct a valuation of the business. Enlist the help of a financial advisor to figure out the buyout cost and whether or not it will impact the company’s cash flow or long-term sustainability.

“Having an accurate idea of what your business is worth can be a significant factor in deciding what course of action to pursue when splitting from your business partner,” says Willis Business Law, “Therefore, obtaining a business valuation from an independent third-party company is essential in the partnership dissolution journey. After you understand your company’s worth, it can be easier to contemplate future scenarios and other factors.”

Consider the legal process.

Your plan to end your business partnership will involve contracts, agreements and possibly even mediation. In other words, you need to get a lawyer involved. It’s important to find one who specializes in business partnerships. For example, the legal structure of your business (LLC, Inc., partnership, etc.) may dictate certain procedures. A legal mind that is proficient in these areas will help to ensure all agreements are correctly documented with payment terms, transfer of ownership and any liabilities.

“Ontario’s Partnerships Act governs most business partnerships,” informs Willis Business Law, “The Partnerships Act also provides, under section 38, that each partner retains their authority and obligations as a partner despite the dissolution, insofar as it is necessary to wind down the partnership’s affairs.”

Carefully plan out your transition period.

Have you ever run a business on your own? Of course, depending on the role your former partner played, you may need to take on new responsibilities. Do you need to hire additional staff? Will you be making any adjustments to the company’s leadership structure? How do you plan on communicating the changes to your employees, customers and stakeholders? Having a clear plan will help you to minimize any impact on daily operations.

Laura Harvey of Ontario Business Central informs that there are many changes that can be made to a business, including changing the individuals who own or are directors of the business. “To make any of these changes, the first item is to understand how your business has been established,” she writes, “There are different filings depending on which type of business ownership has been commenced.”

Get funding.

At Synergy Merchants, we have a long history of helping business professionals to afford buying out their business partners. With our unique merchant cash advance program, you can receive funding within 24 hours! To learn all about it, please don’t hesitate to call us at 1-877-718-2026 or email us at info@synergymerchants.com. You can also apply online for a free, no obligation quote!