How to Get Out of a Business WITHOUT LOSING YOUR SHIRT OR SANITY
Whenever you start a business, always have a buy/sell agreement. If you’re unfamiliar with the idea, let me explain. All partnerships start out with two or more parties deciding they want to get together to either buy or start a business. Each party brings something different to the partnership: One partner may have the funds for the venture, and the other may have the operational skills necessary to run the business and will do so on a day-to-day basis. But what happens if one of the partners wants to get out of the partnership? Or if one of them is not contributing their fair share to the business? Or gets a divorce? Or dies? What if the business fails, and both of you experience financial loss? Each partner is entitled to half the profits in the business, so how do you address this conundrum? Here’s where a buy/sell agreement will come in handy. Basically, it’s a legally binding agreement that describes how a partner’s share of the business may be reassigned if, for some reason, they leave the business. Let’s say your partner dies, and their spouse inherits their interest in the
business but knows nothing about running the day-to-day operations like your partner did. If there’s a stipulation in your buy/sell agreement you drew up before you entered into business with one another, you can settle the problem without a lot of stress or hurt feelings. Too many times, business partners get so excited about the novelty of starting a business that they forget to address this crucial step in the process. Even if you’re going into business with your spouse or your best friend, planning for situations that seem impossible will keep you from getting blindsided down the road. Without a buy/sell agreement, getting out of a business with a good friend or a relative can destroy those relationships — and relationships, like businesses, are easier to get into than they are to get out of. So do your business partner and yourself a favor, and write up a buy/sell agreement.
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