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What happens when a business partner refuses a buyout?

On Behalf of | Apr 9, 2023 | Business Litigation

When a partner wants out of a business partnership, the remaining partners may have to buy them out to continue operations. But what if the outgoing partner refuses the buyout offer? It can be a tricky situation that could affect the future or continuity of the business.

First, you should understand why they rejected the buyout offer. Are they unhappy with the proposed price, or do they want to remain involved in the business? By understanding their reasons, you can devise a compromise that works for both parties.

Consult the partnership agreement

A well-crafted partnership agreement should provide guidance in such eventualities. The document should outline the terms of the partnership and what happens if one partner wants to leave.

The partnership agreement may include a clause that forces the sale of the partner’s share of the business or allows the partner to buy out the other’s share at a predetermined price. If the agreement is clear, then it should be followed accordingly.

Weigh your options

You always have the choice of dissolving the partnership and the business entirely if a revamped buyout offer does not make economic sense. This would involve closing down the business and splitting the assets among partners. It may not be the ideal solution, but it can be a way to move forward without a buyout.

Communication is key

In such situations, communication is paramount. Keep communication lines open and look at things from each other’s perspectives. Understandably, emotions can run high, but it helps to remain professional and focus on the bigger picture -finding a solution that works for everyone.

Project your legal and financial interests

Buying out a problematic business partner can be a complicated undertaking. Therefore, it is advisable to have informed guidance to help understand your options and determine a solution that is in your best interests.