Help! 4 Years ago I started a dance retail business with a nut! She was not honest about her intentions for starting a business with me. She is independently wealthy. I brought the concept, background as a dancer, retail management experience and reputation. Against my better judgement and pleas, she insisted on using her personal money to fund the business. Her bookkeeping skills were such that she's overpay bills before they were due, create a huge deficit, and then when I was off, she'd deposit huge chunks, thousands of dollars to cover the deficit. She never put a loan agreement or promissory note in place. Although I have brought the store to a stunning reputation and continual growth, we are still showing a loss at the end of our 2nd year,but experiencing 67% increase in sales. HOWEVER, my partner has created a $400,000 debt to herself (no loan agreement) and now wants out. We are 50/50. She wants me to buy her out and simply sign note (after the fact) for all of her money payable for the next 20 years to her. The store is only worth $200,000 in its 2nd year. We have no buy/sell agreement. I know, I know....So what is the formula to buy her out? I won't take on a crushing debt. Other than that, there is absolutely NO reason to dissolve a thriving popular new business as it stands. M Crosson
#1. "RE: 50/50 partnership buy out" In response to Reply # 0
Typically, buying out a partner with a note for their original investment is a good deal. Find out why she had to invest $ 400,000 in 4 years. Did your business lose $100,000 a year? If not then have an accountant review the books. See what was she paying and how much came in.
#2. "RE: 50/50 partnership buy out" In response to Reply # 0
When you meet with your accountant or lawyer also discuss the use of a shotgun clause to provide some business exit options. The busines net worth appears to be less than your partner's evaluation and a shotgun clause would force her to accept her own offer. You would sell the business to her at the price she is offering. This forces both partners to recognize the real value of the business.