My business partner wants out of the business, which direction should i go about letting her out?

Asked over 5 years ago - Dallas, TX

My business partner and i own a web and design business. We handle different aspects of the business. But she has decided she wants out. We both invested, put in the same amount of money. She said we should dissolve the company so she can write off her half of the investment. Or i could buy her out for exactly what she put in. But now because of the inc. i know we own "shares". I do not want to have to change my name or dissolve company but want to let her out. But i also know that i should not have to give her her investment back. What is the best way to go about handling this?

Attorney answers (2)

  1. David L. Leon

    Pro

    Contributor Level 10

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    Answered . You can do whatever you guys can agree to do. If you want to buy out her share, and you think her share is worth less than her initial investment, offer her what you think half the company is worth. In the alternative, have an appraiser or accountant value the property and offer her one half of that value. You will need to buy her stock from her, so you are the owner.

  2. Andrew Daniel Myers

    Contributor Level 20

    Answered . You mentioned "inc" and so I have to assume that you set up a valid corporation. That can be a good thing. Because, her "buy out" value is NOT by any stretch of the imagination "what she put into it." Her buyout value is what her share of ownership is currently worth.

    For example, since you didn't give specifics, let me use some easy, hypothetical numbers. You both put $50 dollars into the corporation and you each got 50 shares. You are 50-50 owners, Now, have a CPA come in, possibly with an appraiser possibly not, depending on what your assets are. Get an assets & liabilities statement for your corporation. If the corporation is only worth $10 now, her buyout value is only 50%, or $5.00. If, as is the case now with a number of businesses in our less than favorable national economy, your corporation has negative value, then the value of her stock is zero. Let her go let her see a business attorney if s/he knows anything about business law, they'll agree.

    Look at it this way: people put tons of money in the stock market back when it was hot. Now that it's NOT, they are not entitled to "what they put in". No, they can only cash out at what the current value of the stock is, which in many cases is much less.

    Paying her what she put in would be insane. Think of all the people who would line Wall Street tomorrow if they could get out what they put in to various stocks 6-7 years ago. I'd be one of them. It doesn't work that way.

    That is the financial side of corporate law in a nutshell.

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