By Attorney Lei Jiang, Lei Jiang LLC.
Yes, in most cases. If your operating agreement has a buyout clause, that clause usually controls the price and the process. Even without one, negotiation is usually faster and cheaper than a lawsuit.
Start with the agreement. Before you talk numbers, read your operating agreement — or shareholder agreement, if your business is a corporation. Look for a buy-sell clause: who can buy, what triggers a buyout, how the business is valued, and whether the price is paid at once or in installments.
Value is where most buyouts stall. Agree on a method before you argue over a number: an independent appraisal, a formula in the agreement, or a multiple of earnings.
Do not force the exit. Locking your partner out, freezing accounts, or cutting off distributions to push a low price can turn a negotiation into a lawsuit. Keep the business running normally while you negotiate.
Put the deal in writing: price, payment schedule, exactly what interest is being sold, and the effective date. Add a release of claims if both sides agree, then update company records, bank signatories, and tax filings. If the departing partner guaranteed a loan or lease, ask for that guarantee to be released.
If you cannot agree, try mediation before court. A lawsuit over a business divorce is public, slow, and expensive — a last resort, not a first step.
Start here: Pull out your operating agreement today and check for a buyout clause. That one document usually decides whether the exit is smooth or painful.
Questions? Contact us at info@leijianglaw.com or (440) 835-2271, or book a free 15-minute call: https://calendly.com/leijianglaw-info/15-minute-consultation
This article is for general information only and is not legal advice.