Creating a Successful Business Interest Buyout
If a partnership, limited liability company or corporation has significant assets, it could be in your best interest to buy the entire interest of a departing business partner/member/shareholder through a properly structured business interest buyout.
A business interest buyout can cause challenges. It is important to know precisely how to go about this procedure to make such a transaction a success. So how can you create a business interest buyout that works best for you?
The key points to consider before taking action are as follows:
- Make sure you are aware how the business interest buyout will affect the company.
- Consider whether you can actually afford to buy the interest.
- Use a lawyer. Legal counsel is necessary due to the many state and federal laws involved and to protect your interests.
- Try to avoid a dispute over the process or the valuation.
- Understand the tax implications and rules of the proposed transaction.
Buying Out your Business Partner
The process falls under the following actions:
Get a Valuation of Your Business
It is important that you are aware of the full value of the business. Agree with the other party to hire an outside consultant and mutually agree on them. Alternatively, you can obtain separate valuations that you will have to reconcile later.
Review all the Options
It is therefore important to know precisely what options are available to you. Talk to a lawyer about the process and how to meet your goals in the deal.
Make sure that all necessary paperwork for the purchase is filed. In addition, once the deal closes, transfer all business accounts to your new business name. Make sure that your ex-partner’s name is taken off all ownership documentation and accounts. If an agreement has been reached, there will still be shared liability for the time the business was co-owned.
Funding a Business Interest Buyout
Funding to buy out your partner is not always easily obtainable. This is because new debt (loan) will not positively impact the company – even if the partner you are buying out has a detrimental effect on the business.
This means that self-funding is often the best method. You would pay the departing partner in installments for their interest in the business.
We can Help you Create a Successful Business Interest Buyout
When buying out an interest in a business, care should be taken to achieve the intent of the parties. This is one of the keys to a successful business interest buyout.
When you work with the Law Offices of Lisa Wills we take time to get to know you and your business so we can grasp the unique issues and concerns that you may be facing. You will get personal attention as if you are our only client. And we understand legal problems can be stressful. We will keep you well informed, promptly return your telephone calls and emails, listen to what you want and work hard to meet your goals. Contact us for further information at (925) 463-9000.