Selling your business share to a partner is actually one of the most common ownership transfers among small businesses. This is mainly due to the fact that your business partner is already invested in the business, knows the books, and has a clear understanding of the business’s potential for success.
A business partner is someone who, like you, would want the legal transaction to be as smooth and seamless as possible. It is a negotiation without disagreements or concerns, and can actually be painless for both of you. The best thing to do is sign a “Buy-Sell Agreement” (also known as a Buyout Agreement) when the partnership begins. Why? Well, the primary purpose of this legal agreement is to outline the procedure for transferring ownership, the price, and the purchasing terms between partners. This way, both of you are protected from an emotional selling process at some point in the future.
In the Buy-Sell Agreement process, both parties agree on the basis for measuring the value of the business. This guarantees that no seller feels that the partner is increasing the cost in order to make a greater profit from the one attempting to leave. This arrangement benefits both parties and prevents any nasty disagreements or issues down the line. In addition, there is a security clause requirement for the departing partner to sign a confidentiality, non-compete and/or anti-solicitation agreement. This protects the remaining business partner from releasing someone with trade secrets into the hands of the competition.
To sell your share of the business, be sure to have a Buy-Sell Agreement ready and the good counsel of a business broker such as the knowledgeable team at Transworld Business Advisors. With this combination in place, the process can be quick and seamless.