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Does your business partnership have an exit strategy?

On Behalf of | Jan 17, 2025 | Business Disputes

Establishing a business partnership can provide many benefits, such as expanding a company’s market, splitting ownership, expanding experience and increasing business opportunities. Any business partnership is established with a partnership agreement. This agreement sets the terms of a partnership, including the roles of each party, financial obligations, liabilities and length of an arrangement. 

When drafting a business partnership, one of the many considerations is conflict. Business partners may disagree with how a business is run. Or, a party may take actions that violate a contract. Disputes can be resolved, but many do not. This is why including an exit strategy in a partnership agreement is so important. Here are a few possible ways to end a business partnership: 

Partner buyout

You may offer your partner the option to buy your share of a business. This may mean establishing a business’s fair value, setting a price and considering the legal and tax considerations of an agreement. For example, this would allow a party to continue running a business when partners no longer see eye-to-eye or one is ready to leave.

Merger or acquisition

A partnership agreement may state that another business has the opportunity to acquire the business. This can allow both parties to potentially gain from a business while no longer maintaining control of the business. Alternatively, a business partner may continue working with the other business. 

Liquidation

If a business partnership fails and the business has suffered serious financial losses, it may need to be liquidated. This is often done by closing down the business and selling off assets, which could end a business partnership.

It can help to explore your legal options to protect your interests if you are starting a business partnership. 

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