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Can you buy out your business partner over a dispute?

Dec 22, 2022 | Business Litigation

Sharing ownership of your business with a partner can benefit you in numerous ways. It can increase the investment capital you have when starting the company, which can help you get the idea off the ground before your competitors establish themselves. You may need help running a business or handling the technical aspects of your future operations, which is where the expertise of a business partner could come in handy.

The two of you can share the responsibility for your business and also share the benefits generated when the company thrives. Unfortunately, even if you have successfully started a company that now produces a significant revenue stream, you may want to end your business relationship.

Maybe your partner has started taking liberties with the company expense account or simply doesn’t put in enough effort anymore. Can you buy your partner out to assume full control over the company?

You may already have rules for a buyout in your contract

Negotiating a partnership contract often involves talking about what will happen at the end of your business relationship. You may have already committed to certain specific terms for a buyout.

If so, you simply need to follow the procedure outlined in your partnership agreement and approach the issue to your partner. If you don’t already have terms in place for handling a buyout, you need to prepare a proposal.

Talk to your partner about your idea

In most cases, honestly talking about your partner once you firmly commit to the idea of a buyout is the best path forward. Of course, you need to have certain information in hand before you have that conversation.

For example, you need to know what the company is currently worth and determine what an appropriate amount would be to offer for the buyout. You may also need to consider where your partner is at personally and professionally so that you can make your pitch about the buyout as appealing to them as possible. Perhaps you can frame it as a way for them to retire a few years early, or maybe it will free them up to pursue an even more lucrative venture elsewhere with the capital they secure.

In all but the rarest of cases, a buyout is a viable option when you and your partner no longer agree about how to run your business. Exploring alternate means of resolving a business dispute, including buying out your partner, can help you turn a frustrating situation into a beneficial one.