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Can your business partner force you to sell?

On Behalf of | Dec 6, 2022 | Business Law

You and your business partner own the company together, and you own it 50-50. It’s been that way since you started the business with just a few thousand dollars in loans, and it’s still that way even though the business is now worth millions.

What has changed is that your business partner wants to leave. You certainly want to keep running the company, and so it looks like it’s time for you to part ways. But the financial side of this can get complicated.

If you were to sell the business to someone else, you and your business partner could split the money. If you want to stay, this may mean that they still want you to pay them for their 50% ownership. After all, that’s what their half of the business is worth, and they don’t want to give up on their investment as they move on with their life.

Getting a valuation

There are a lot of things that have to be done in this situation, starting with getting a valuation of the company. Remember what your goals are and that you need to be reasonable. After all, the top reason that one business partner will refuse this offer is simply if they don’t think that it gives them a fair amount of money. If their half of the business is worth $2 million and you offer them $500,000 to buy them out, for instance, they aren’t likely to agree because it’s simply not close enough.

What if you can’t afford it?

The problem comes up when the value of the business is so high that you can’t realistically afford to buy the other person out and continue running the company. Even if the value is $4 million, it’s not as if you have $4 million of cash on hand.

In some cases, this may mean bringing on a new business partner. It could also mean buying out only a portion of your partner’s control and allowing them to stay on as a silent investor. You may also want to consider taking out a business loan, which you could use to buy the other half of the company,

There are a lot of options. In the worst case, it may go to court, and the court can decide that you have to sell the business. But this is usually a last resort, so it’s important to work through your other options first, keeping all of your legal rights as a business owner in mind.