Breaking Up is Hard to Do for Business Owners
This time we're not talking about lovers or marital partners. We'll talking business partners. Nonetheless, the breakup can be just a messy as a Hollywood divorce without proper planning on the front end.
Business partners starting a new business can be a lot like newlyweds having their first baby. Beginnings are supposed to be an exciting time filled with optimism. Business owners hope the venture will be rewarding and prosperous for years to come.
Prudent business owners have to keep a clear perspective and not get so dewy-eyed they forget to make a contingency plan. Not all businesses will be successful and it is a real possibility one of the owners will want move on or sell before the other is ready to let go.
That's why comprehensive start-up or merger documents should include exit terms if a business partner wants out or needs out. The most common exit options for private businesses include:
1. Family Succession: Transferring ownership interest to a family member.
2. Management Buy Out (MBO): Selling ownership interest to internal management or employees.
3. Flotation: If ownership is represented by stock, a shareholder can list the shares on the stock exchange.
4. Trade Sale: Selling one's ownership interest to a third party.
5. Franchising: Creating a franchise and then selling the franchisor rights.
6. Management Buy-in (MBI): Selling ownership interest to outside management.
7. Winding Up: Closing the business down and winding up operations.
8. Merger: Merging the business with another business and allowing the first business to be subsumed in the merger.
Prospective business partners need to take the time up front to agree on a contingency plan in the event of a break up. Depending on the nature of the business, some options would work well while others would be unacceptable. Consult with an experienced business law attorney to help structure the best plan for you and your business.
The attorneys at the Peterson Law Group are experienced in Texas business law and can take care of the details for you every step of the way. Consult an experienced Bryan-College Station, Texas business law attorney for assistance and answers to your questions. Call the Peterson Law Group to make an appointment at 979-703-7014 or fill out our online contact form.