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Help – My Business Partner Doesn’t Want To Sell!

Once upon a time, you and your best friend went into business together with the perfect product at the perfect moment. You got off to a quick start and the profits were great. You were getting along swimmingly – until, one day, the profits started to dry up for your industry. Now you’re investing all this money into the marketing and growth of the business, but you know you’re on a sinking ship and you want out. The trouble is… your partner is totally delusional, still clinging to the overly optimistic view that everything will just turn around as fast as it went sour. What are you to do?


Buy-Sell Agreements

You can think of a Buy-Sell Agreement as a sort of “prenuptial agreement” between business partners or a “business will.” Such a legally binding agreement will detail when owners can sell, who they can sell to, and what price will be paid. In the paperwork, acceptable triggers will be laid out for the buyout – for instance, death, disability, retirement, or simply an owner’s desire to leave. Having this paperwork drawn up when you form a company is the smartest thing you can do. But if you didn’t consider this before, there are still some things you can do.


Dissolve The Company

Some states let a shareholder with 50 percent of the company’s stock dissolve the corporation. However, the shareholder must have the consent of the other shareholder in order to do it. If the partner refuses, the shareholder can go to court to see if assets may be sold and split or if a buy-out arrangement can be made.


Employee Buy-Outs

Perhaps the simplest option is an employee buy-out transaction, where the buyer and seller get a valuation of the business done and the departing shareholder receives a portion of money for his share. Usually this is facilitated through an ESOP loan. In return, the shareholder may agree to consult about sales, services, products and clients during the transition.  


State-Sponsored Dissolution

Most states offer a procedure where you can petition the state court to dissolve your LLC. The courts will then decide who gets what assets, but this can be an expensive route to go. There is also no telling what may transpire or whether you’ll both get a fair deal or that your friendship will come out of the legal process still in tact. Going this route should be seen as a last resort.


The Bottom Line:

Before going through the whole rigmarole, make sure you take a deep breath and think things through. Do your best to persuade your partner that dissolving the company is the right move. Yet, also keep an open mind. Hiring an outside business consultant to take an objective approach to your business might be a good idea. Sometimes a consultant can find ways to salvage the business enough to make the enterprise sellable. Other times, the consultant may conclude that the business will continue on a downward trajectory until you’re both broke. In this case, having that impartial third party opinion may help you make a stronger case with your friend.  



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