Taking on a business partner can be a smart decision. An entrepreneur with a great idea but no practical experience can gain the support of an industry insider. Those with skills and experience but no capital could rely on a partner to help fund a new business concept.
Business partners share financial liability and job responsibilities. They split up the various tasks that fall to business owners and executives. They can then share in the success of the organization that they started together. Unfortunately, business partnerships can fall apart with little forewarning.
One partner may cease fulfilling their contractual obligations. They might embezzle from the company. They might make a sudden and unexpected switch in what they intend for the company and what they expect to receive from the business. When business partners find themselves embroiled in a dispute, one partner may want to buy out the other. Is a buyout the best solution to a partnership dispute?
Other solutions could resolve the issue
In cases where there has been a significant disruption of the working relationship or a fundamental breach of the trust that is necessary for a successful partnership, a buyout might seem like the only feasible solution. However, many partnership disputes do not have to end the working relationship between the partners.
They might be able to discuss the matter and work out their disagreements. Provided that the business partners can communicate calmly, have evidence of their concerns and work cooperatively to compromise, they may be able to continue working together. However, when the issue is substantial or when the relationship has undergone a substantial decline due to prolonged tensions and repeated disappointments, then a buyout might be the best option available.
Proper preparation is key
A successful partnership buyout requires compliance with the terms established in the initial partnership agreement. The partner proposing the buyout often needs to offer a reasonable amount of compensation and flexible transition terms for the other business partner. They need to be ready to make certain concessions and to negotiate.
In some cases, they may also need to prepare for the possibility of litigation. Their partner may claim that their offer violates the terms of their agreement or may dig in their heels and refuse to accept even a generous severance package. A successful partner buyout begins with a contract review and the development of a workable but adjustable offer.
Those navigating complicated business issues often need help exploring their options and protecting themselves. Those aspiring to buy out a business partner may need help preparing for what could be a lengthy and contentious negotiation process.
