Avoiding a Messy Buyout

Avoiding a Messy Buyout

Businesses fail for reasons unrelated to the market, the products, lack of capital and other “official concerns.” At times, bad dynamics between owners just drive the organisation to the ground.

At one point, people change. The partners you started the business with may not be the same people as the organisation grows. They can be the right fit initially but not in the long run.

For reasons beyond your control, you would have to prepare for a fallout at some point. It doesn’t happen to everyone but you must be open to the likelihood that it can happen to you. If the situation reaches to this point, how do you get out the situation? How do you solve a buyout with a bad partner? We give you some tips.

Consult a Lawyer

Seek legal counsel if a buyout is necessary. A lawyer can tell you how the situation will turn out and how to handle it. It may cost you considerable money but legal consultation is always worth the investment. An attorney can ensure that everything is sorted, organised and processed properly. He/she can also review the partnership agreements and make sure everything follows the regulations.

Should You Proceed

There are things you should do if you decide to proceed with the buyout: complete the necessary paperwork, accomplish an efficient valuation and seek the right funding.

You need to file all the paperwork properly and remove your partner’s name from all business accounts. At times, you may just need to set up new accounts. See to it you have a lawyer and accountant guiding you throughout the process.

A buyout is not complete with valuation. Hire an independent firm to determine the full value of the business. Once you get the price, that’s when you can seek the right funding. Sources vary but most common options include debt financing options, personal savings, line of credit, business loan or business credit card.

It’s never easy to part ways with business partners especially considering the work you put to set up the business. Buyouts don’t have to be messy. You can always go about in a rational and civil manner.

For other small business assistance, especially funding options, contact us at Gapcap.

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