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When one partner leaves: Developing an exit strategy

On Behalf of | Oct 8, 2019 | Business Formation & Planning |

In any Florida company with more than one owner, it may be reasonable to expect that one partner will withdraw from the business before the other.

Whether it is because of poor health, unexpected family issues, retirement, a dispute between partners or some other reason, an exit strategy may allow one partner to leave and the other to stay without any negative effects for either.

Timing is critical

In a marriage, the time to create a prenuptial or postnuptial agreement is not during divorce negotiations. According to Chron.com, the best time to create an exit strategy is at the beginning of the partnership, when they are creating a business plan. Possibly the worst time to consider it is the moment when a partner is ready to make an exit.

Potential strategies

If only one partner is leaving, he or she may want to sell out to the partner, or create a succession plan that allows him or her to groom a replacement.

Inc.com notes that it is important to have a personal back-up plan with a financial portfolio that can provide support until the partner leaving the company can liquidate his or her shares.

Buy-sell agreements

An exit strategy should include a buy-sell agreement that allows partners to sell their shares without causing any damage to the company and to receive a fair price. The agreement should include a formula using industry-specific, verifiable metrics to determine the value of privately held shares. It should also list when the partner can sell the shares, who may purchase them and how long it may take to sell them.


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