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This video and article originally appeared on the
Techopia website and have been reproduced with permission.
In this short video and article from Techopia, MNP’s Doug McLarty explains how to approach a situation when only one partner wants to exit a business.
“Doug, my partner wants to cash out and I don’t want to – what do you suggest we do?” Any time there is the prospect of a fundamental change in how your business operates, it’s time for a critical examination of where you are and where you are going. Ask these questions:
There are many factors to take into consideration to ensure an outcome is not one-sided. Your partner will need to be flexible about the timing to ensure there isn’t a negative impact on the organization as a whole. He or she may need to stay involved in a reduced role for a specified period of time. Your partner may need to be flexible about the timing of any payments, too, and may not receive all the cash at once. You will also need to take into account your current structure and the tax implications of any decisions.
You can start with what you already have in writing, such as your shareholder agreement. This should outline how partners can buy or sell shares. You will also need a professional valuation of your business, if you don’t already have a recent one, to understand what your business would be worth if you were to sell today.
But this is just the beginning.
You need to be cautious, but you must also be open and honest, in your efforts avoid an adversarial situation. To arrive at a win-win for everyone involved, and avoid acrimony and threats of litigation, you may need some type of mediation.
A process of fair and unbiased mediation needs a fair and unbiased mediator. Even your existing professional advisors (lawyers and accountants) may not be in the best position to play this role.
Instead, your best course may lie with an objective third party with no vested interest in your business. This individual can work on equal terms with you, your business partners and your professional advisors, with all the cards on the table.
Who is this mediator? It could be succession/transition specialist with respected industry accreditations – a coach who understands your needs.
If you invest 90 per cent of your efforts on the communication side to determine the best outcome, implementing the transaction should be straightforward because you will be able to give clear directions on what you want to achieve.
For information about MNP’s
ExitSMART™ transition planning services, contact Doug McLarty, FCPA, FCA, CFP, TEP, ICD.D, at 613.691.4222 or [email protected]
Client Groups:Private Enterprise
Related Topics:Business Structures; Selling a Business
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