What Steps Are Necessary To Buy Out Your Business Partner?

Did you start your business with a partner who no longer wishes to run the business with you? Are you putting in all the work while your business partner slacks off? Have you come to a disagreement with your business partner that can’t be resolved? Is it simply time for you and your business partner to go your separate ways?

Answering “yes” to any of the above questions obviously means it’s time for you and your business partner to split. But how do you go about it? If you’re choosing to continue to run the business, you’ll have to buy your business partner out. What steps do you need to take?

Revisit your original agreement.

Hopefully, you’ve already determined what will take place in the event of a split between you and your business partner. When drafting up the original documents that determined how the business would be run, you should have determined ownership status. Do you have a 50/50 split or is either of you majority owners? As Jared Hecht points out on Inc.com, your original agreement should have also outlined a dissolution strategy.

“Think of your dissolution strategy like a prenuptial agreement for your business partnership,” he explains, “It creates a clear exit strategy from the beginning, while everyone is on good terms. That way if things go south with the partnership, you’re not stuck negotiating how to part ways in the midst of hard feelings.”

Determine the company’s value.

Of course, one of the biggest questions you’ll need to answer is “How much do I owe?” In order to buy out a business partner, you’ll need to make a payment that is fair. Keep in mind the current value of the business isn’t likely to be what it was when the business first started. As a result, your original agreement isn’t likely to have an exact dollar amount to settle a split between you and your partner.

“Valuing a business can be complex, as it isn’t just the assets, income, and liabilities that should be taken into consideration,” says Fora Financial, “In addition, you must consider the value of the brand, ‘goodwill’ the business has, future growth potential and any impact the partner leaving will have on the business. This can make valuing the business yourself difficult, so it might be worthwhile to hire an independent party to conduct an evaluation.”

Research your buyout funding options.

Naturally, you need money to buy out your business partner. But, for most small business owners, lump sums necessary for buy outs aren’t exactly easy to come by. As Hecht notes, banks don’t make it easy to attain funding for such purposes.

“When lenders consider approving your small business loan, they are looking for ways that the capital will boost profits for your business–profits you can use to make your loan payments,” he writes, “Because a buyout doesn’t actually infuse any new money into the business or financially benefit the business in any way, it can be tough for owners to successfully make loan payments. So lenders tend to avoid servicing buyout loans.”

At Synergy Merchants, our unique merchant cash advance program has been used by Canadian business owners who wish to buy out their business partners. Our funding solution may just be what you need in order for you to move forward with your company as its sole owner! For more information about our program, please don’t hesitate to call Synergy Merchants at 1-877-718-2026 or email us at info@synergymerchants.com.