Buying partner out

I would say those are factors, plus what about the selling partners salary? Assuming he was drawing a monthly salary from the business, once he sells out that salary ends.

Depending on the type of assets, friend might well need to pay for a formal appraisal. Just working from internal records, it would be easy enough to simply subtract liabilities from assets, but the normal and acceptable methods of accounting for fixed assets can vary widely from reality.

If this is a friendly split, they can simply agree on a price, so if the assets on the Balance Sheet seem reasonable, that can be a basis for an agreement.

It would not be any relationship between sales and liabilities. They're simply not related.

Sometimes people in small corporations refer to each other as "my partner", but if the legal form of the business is an actual parnership, neither would be receiving salaries, so that is not a factor.

If they are really friends, it's possible the other partner might accept cash plus a note. The note would be a personal, not a business liability

Depending on the nature of the business, they might require professional help.

Oh, you might do a search on Uniform Partnership Act.

This is a family deal - restaurant.

Buildings appraised at 1.5 mil.

Last three years the gross income averaged about 1.3

there is a $400,000 mortgage and other current tax liabilities, insurance, etc.

The person leaving was grossing about $3800 per month.

She wants $750,000 CASH for her part of the corporation stock.

She/they need professional help then, and by that, I mean a CPA familiar with that kind of transaction.

I was with a company that just changed from a sub S corp to a C corp, and they had to do the whole deal, which included essentially dissolving the S Corp and reforming as a C Corp. Assets were professionally appraised, and the old S Corp had to pay capital gains tax on what amounted to a gain on sale of assets. The new C Corp, of course got the appraised value of the assets for purposes of depreciation. I was a pretty competent accounting clerk, but this one was way beyond my experience.

Anyway, what I anticipate as a gain of sale of assets will surely become of interest to the selling partner. They are going to have to work out the selling price between themselves. I once heard the rough formula was something like five times annual revenues, but that sounds kind of squishy, and note I said revenues, not net income.

I'm afraid the only help I can give is to suggest they deal with a competent CPA. Cost of appraisals and all other fees would normally be an expense to the company, rather than either buyer or seller.

I suspect this is a corporation of some kind, and are using the word "partners" kind of casually. At this level of discussion, it doesn't really make a difference.

Thanks, Roger.

Yes, this person is taking the gross net and adding the appraised value of the buildings and dividing that by the number of shares iin the corporation.
That's where she got the $750,000.

The other partner has no way of coming up with that kind of cash. (She wants a full, cash buyout)

The family lawyer thinks she's way off the mark, too.

Is either 'partner' the face of the business? the goodwill associated with that face has a financial value as well.

Hello Friends,

For some companies, their biggest roadblock to growth isn’t a lack of ideas, motivation or initiative. It is a business partner that has other priorities. For companies with significant growth potential, this challenge arises frequently. One owner wants to grow; the other wants to sell. One owner sees potential and the other sees risk. Sometimes this comes from different perspectives, stages of life or generations like in family businesses (the younger generation wants to build wealth while wants to protect it). Owners caught in this position can go through years of treading water, and it’s not until it is addressed that greater growth can occur.

Thanks and Regards,
Romen Esko