Choosing to step away from your business is a big decision, and your exit strategy can have lasting implications both for you and the company you’ve been a part of. While there are a lot of different ways you can go about this process, here are three common partnership exit strategies and tips for picking the right option for your situation.
1. Sell Your Share to Your Partner
One of the most straightforward paths to exiting a business is to sell your share to a partner who is already deeply invested in the company’s success. Your partner is familiar with the inner workings of the business and is often the most qualified person to seamlessly assume your responsibilities.
This transition is even easier if you have a well-crafted buy-sell agreement in place. Such agreements are common between business partners and can establish a guideline for important aspects of your exit, such as the value of your share and the sale terms.
Even without a buy-sell agreement, many partners are willing to collaborate with you and find a solution that fits both of your needs without majorly disrupting regular business operations.
When Not to Sell to Your Business Partner
Though some business partners are open to buying your share and creating agreeable terms, that isn’t always the case. If you run into the following problems, it may be best to look at other exit strategies:
- Inability to agree on a price
- The pace of proceeds is too slow
- There’s contention when creating terms
- Your partner is unwilling to take on your responsibilities
A business law attorney may be able to help mediate the situation, but if the disagreements are too severe, it may be valuable to consider other options.
2. Sell Your Share to an Employee
If your partner is not an option, then choosing another employee could be a viable alternative. While legally intricate, this exit strategy can offer several benefits as well:
- Placing responsibilities on a knowledgeable party
- Offering benefits and incentives to the employees
- Creating a gradual exit plan
If you have the time and ability, training an internal employee to take over your share of the business can be a great way to make a slow but impactful exit. This method will ensure that your responsibilities go to a trusted and capable person while motivating the rest of the team.
3. Sell to a Third Party
Selling your portion of a business to a third party can provide you with a higher sale price, more immediate cash, and some tax benefits. That said, there are some risks with this method that can affect both you and the remaining employees.
Unlike working with your partner or employees, you’ll be negotiating with an unfamiliar party that is looking to maximize their profits. Negotiations are often longer and more challenging, especially if you are choosing this method to obtain a higher sale price.
Not only that, but you may also want to consider how the new addition will impact the business after you leave. Bringing an outside buyer in can significantly change the company’s culture.
Business Law Attorney in Dallas, TX
Exiting your business partnership can be a long, difficult, and emotionally draining process. Ensuring you get the value you deserve is an even harder task, but the business law professionals at Sul Lee Law Firm can make it easier.
From managing buy-sell agreements to helping you navigate third-party sales, our skilled attorneys will work to meet your needs with precision and foresight. If you want assistance at any phase of your exit strategy, contact our team for personalized legal advice.