What are ways to negotiate a partnership exit?

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On Behalf of Bell, Shivas & Bell, P.C. | Jan 22, 2022 | Business & Corporate Law

Your business partnership may have been a worthwhile enterprise at one time, but now you are thinking of leaving the business, perhaps to start a new company or business endeavor. If so, you might have to negotiate with your partners on how you will make your exit from your partnership.

According to Chron, there are a number of different outcomes that may result after negotiating a departure from a business partnership. Understanding these possible outcomes may help you work towards the result you want.

Use a buyout agreement

Your partnership agreement may include a buyout clause for all partners. This allows you or any of your partners to sell your ownership interest to the other partners. A buyout agreement should describe a method for appraising how much your ownership is worth, or it should set up an amount that your partners will pay you. If a buyout agreement is in place, it should be a simple matter to exercise its provisions and sell off your ownership.

Set up installments

Without a buyout provision, it is up to your partners to accept any buyout offer you give them. However, they may not accept your offer on the grounds that your amount is too high. Instead of asking your partners to buy you out in a single amount, you might set up a way for them to buy out your interest in installments. Your partners may find this to be a more acceptable choice.

Take over the partnership yourself

It is possible that if your buyout amount is high, your partners may counter your offer by giving you the option to pay that same amount to your partners. Instead of buying you out, you will be buying out your partners and taking over the partnership as the sole owner. Going this route will depend on whether you can finance the buyout and if you want to take over the partnership and make it your own business.

Ask a mediator for help

In the event your negotiations reach an impasse, you may need outside help to resolve the situation. Some business contracts allow for an arbitrator to hand down a solution. However, you may feel more comfortable working things out with the help of a mediator. In mediation, you have more control while relying on the expertise of an impartial person to help you iron out a solution.

Given the differing outcomes to a partnership exit, it may help for you to determine your priorities in advance. Know what to shoot for so you can work towards that goal.

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