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Leaving the Partnereship

Many business owners enter into a partnership without a good buy/sell agreement in place.  Often this puts a heavy burden on the buyers, sellers and heirs.   The problems with most agreements are:  1. Failure to define the terms of the exit, 2. What criteria will trigger the agreement?  3. How the company is valued today and in the future, 4. Defining the terms of transferring the business to the new owner(s), 5.  Will the partners honor the agreement and the penalty if they do not?  6. The valuation terms for a partner who leaves voluntarily or is terminated, 7.  What happens when the company has other obligations that do not allow it to meet the terms of the buy/sell agreement?   8. Failure to use a professional in drafting the document.

Personalities make it difficult to define the perfect buy/sell agreement.  However, some elements for a buy/sell agreement should include:
1.  Establish the valuation formula and terms before the deal.
2.  Insure that there is a clear path for the separation.
3.  Define the criteria that will be used in determining valuation, surviving partner, exiting, deal structure, and a non-compete agreement.
4.  When the parties cannot agree, who will arbitrate and what authority will they have?

Good Luck
Steve Sink
Certified Business Intermediary
Merger and Acquisition Master Intermediary

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