When a business partner wants out, things can get emotional—and messy—fast. But with the right planning and paperwork, small business owners in Washington can navigate a buyout without burning bridges or leaving legal loose ends. Whether you're buying out a longtime friend or parting ways with a co-founder, here are four key things to get right.
1. Always Get It in Writing
This should go without saying, yet it always comes up. Even if you've been in business together for years, don't rely on verbal promises. A written agreement lays out exactly what each side is agreeing to: price, timeline, responsibilities, and more. The agreement should include how you came up with the buyout number and who calculated it. This protects everyone if questions come up later. In Washington, written agreements are especially important if you want a deal that is held up in court.
2. Be Smart About Payment Terms and Protections
Not every small business can afford a big cash buyout up front. If you're paying over time, make sure the payment schedule, interest, and late penalties are clearly spelled out. Proactive sellers should also consider security for repayment. Real estate usually works best, but the business's assets can also serve as adequate security in certain circumstances.
3. Cover Indemnification—Yes, You Need It
Indemnification might sound like legal jargon, but it's just protection from future problems. If the exiting partner gets sued over something that happened while they were still involved with the business, you'll want to be clear about which party bears responsibility. Your agreement should also address the scope of indemnification to determine what is and what is not covered. This avoids confusion for months down the road.
4. Don't Forget the Nuts and Bolts of Leaving
Once the papers are signed, all parties should want the transition to be as clean as possible. This should always require the return of all company property like laptops, keys, and credit cards. The departing partner should also lose access to their business email, QuickBooks, file storage, and any apps tied to your operations. Change passwords and update user permissions right away. These small steps help keep the business secure moving forward.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
