View Full Version : Business Partner Wants Out

11-21-2005, 12:56 PM
My business partner wants out. Even though this is a blessing in disguise, I have no idea what to do. Please help!

11-21-2005, 02:53 PM
This will depend entirely on what sort of business you have, and where you are.

Is it a Limited Company (UK) or LLC (USA)? Or just an informal partnership? Or some other arrangement?

How big, or complex is the company? This will determine whether it is worth getting legal people on board, or whatever.

To consider the mechanics of a split, we need some basic information.

11-21-2005, 03:07 PM
we're a small childrens specialty store in north miami beach florida (usa). we're an "s" corporation/50-50 stock. we are not a big company. we've been around for only 1 year so naturally we're in debt. is he intitled to anything monetary because of this?

in addition, he was gone for 5 months of the year, leaving me alone running the busines. do i have to give him 50 of business anyway? we can probably discuss this morally but i wanted to know (in case this gets ugly) what do i have to give up now that HE desides to leave?

11-21-2005, 06:45 PM
Dissolving an S-corp should definately be handled through the state since each state offers their own statutes regarding dissolution. With the main benefits of an S-corp being the limited liability and the tax breaks it provides the owners, you may want to research how Florida handles involuntary dissolution and determines ownership.

From what I can recall, involuntary dissolution can be filed as long as the person filing the complaint has standing (you were a co-owner) and grounds to claim (went 5 months without getting assistance in business functions). The Plaintiff would name the the corporation as the defendant and if the Plaintiff could show why the corporation should be dissolved then the court will order dissolution.

I am not an expert at state law, so I would recommend researching this more.

Hope this helps,

Matthew Quasebarth, Quasebarth Advantage Consulting

11-21-2005, 06:53 PM
i don't want to dissolve the business. i will continue on my own but i just want to pay him what he put in and that's it. besides, he can't claim profit or assests if we're in debt right? tell me more about running the business along for several months. can i use that against him?

11-21-2005, 07:39 PM
I really cannot say if that would be beneficial or not. Here is a link that will review the Florida Statutes for incorporation.


I hope this helps,

Matthew Quasebarth,Quasebarth Advantage Consulting

11-22-2005, 03:05 PM
You know... I may just have to concider selling my business. :( How do I even begin putting a price together?

11-22-2005, 05:00 PM
Is it possible for you to just dissolve and re-organize as a sole proprietorship. You're liability will increase, but you should be able to keep operating.

Also, consider taking on a franchise. It's possible that they would be able to help you with capital and you may be able to re-finance to get a better rate on any money that was borrowed.

Definately, don't give up. If you do give up, then your business will definately cease to exist.

Matthew Quasebarth, Quasebarth Advantage Business Consulting

11-25-2005, 10:38 PM
I dont know a whole lot about it, but first Id try seeing if you can buy your partner out. Usally they are willing to take whats fair. Im not sure if you can just dissolve. It may be possible, and definitely worth looking into. I think your best bet is to see if ya can buy your partner out for a fair price. Monitarily, hes entitled to something, unless you want to declare the business bankrupt, at least thats my understanding. Even business that have a negative cash flow, are considered to have a certain value. I could be very wrong about this. Your best bet is to research your states law on the subject. Its never cut and dry, but usally it will give you a good idea of where you stand.

11-29-2005, 12:47 PM
okay, so he's entitiled to what then exactly? only the inventory correct? i mean, the little he put in is lost right - it's an investment! so how do i calculate his portion of inventory? considering some items won't sell, some have been damaged, some are sooo old, some will have to be practically sold below cost. is there a standard percentage on this sort of thing?

02-01-2006, 06:58 PM

I think the first piece of info that will enable us to help you is relative to what he WANTS.

Is it possible to find out in a friendly manner?

Then find out if he realizes you will have greater debt than assets by assuming all the liability. Will he bow out gracefully under this scenario?

If he insists he wants SOMETHING, see if you can set a reasonable figure agreeable to both of you and have HIM explain "HOW" he arrived at this amount. Value must be determined realistically. If you were to sell all the assets now, payoff all the liabilities, what would you have left? There's your realistic value.

It's common to figure net income and use a multiplier to establish value. Most industries have this "rule-of-thumb." But a new starving company has little real value unless it has a substantial net worth.

Then explain (he'll already know this is true, you're just letting him know YOU know) you can't afford monthly payments until the company is profitable, so explain you will have the CORPORATION create an UNSECURED promissory note in his favor for $____ the agreed amount.

Play down the unsecured part, and if he emphasizes it, explain the reason you BOTH setup a corporation was for personal liability protection, and you don't plan on changing that plan anytime soon.

MOST important, is negotiate, negotiate, and then negotiate some more. DON"T let him make you weary and break you down. Show NO weakness, and ALWAYS be in control. Don't show fear or worry. Have an almost, "I don't care" matter of fact attitude. Don't let the shark smell the blood or he will instinctively want to devour you.

Be cordial, cooperative, emotionally mature, self-controlled (no matter how much it hurts) and don't settle for what's unreasonable. Be the aggressor, without looking too aggressive, but NEVER show weakness.

I am a corporate negotiator, I know the game well. Once I learned these principles and actions, I win much of the time. Let him SENSE your strength, without you verbally stating it. You MUST stand up to him with courage and determination, always being firm but tactful, no matter how emotional he gets.

When negotiating your DEAL with him, place very LITTLE value on the business as it is today while emphasizing how much you will STILL need to invest in future time, effort and money. ALWAYS ask for MORE than you want. You can ALWAYS go down but never or very rarely go up in price. Make him THINK he is winning, by letting him win LITTLE things while you win BIG things. Don't let on you are doing or even aware of this.

Once you decide what to do, get back to us here in the forum, and maybe we can be of additional service.