What to Do if Your Business Partner Won't Sell?
Business partnerships can go bad for any number or reasons. A partner’s personal priorities may change due to personal circumstances, such as the birth of a child prompting a desire for more free time or enhanced financial security. In other cases, the partners may want to move the business in different directions or handle debt repayment in different ways. If you want to buy out a business partner who refuses to sell, you can pursue several options.
Sometimes reaching an agreement means sitting down with your partner and pinning down what he wants to get out of the deal. He may not wish to completely abandon the business but would agree to a partial buyout that leaves you the majority shareholder and primary decision-maker. In some cases, the partner wants more money than you anticipated and may prove willing to reach a buyout agreement if you can find a price point agreeable to both parties.
If the relationship between you and your partner deteriorates to the point where a frank, rational conversation becomes impossible, a professional mediator can assist in negotiating an agreement. Mediators lack an emotional investment in the decision and can offer an objective analysis of the situation. For example, if your partner demands an over-sized buyout offer, the mediator can point out the unreasonableness of the demand compared to the value of the company without it looking like a dodge or personal attack.
When all else fails, you can ask a court to bring the partnership to an end. The court will determine what it considers a fair settlement for your partner and issue an order that outlines the actions you must take. You should probably take legal action only as a last resort, since it entails legal fees, in addition to any settlement, and you cannot predict the amount a court will determine you owe your partner. In a worst-case scenario, you may find it necessary to sell off business assets to comply with the court's order. Selling off assets can leave you worse off than if you made a private arrangement with your partner.
A buyout clause in the business’s operating agreement offers a simple way to avoid a situation where one partner refuses to sell. A buyout clause gives a partner the option to buy out the other under certain conditions, such as death or disability, but can also serve as a mechanism for dissolving partnerships in other situations. The buyout clause should include a method for determining the value of a partner’s stake in the business and conditions under which a forced buyout can occur, as well as an agreed-upon option or set of options for providing payment for a buyout.