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Buying a business partner is not actually a simple process; sometimes, it is emotionally distressing. So, it is good to apply a little caution and professionalism while doing so in order not to make any costly mistakes.
Whether you want to dissolve the partnership or restructure the business, any mistake can cost you a lot of time, money, and legal actions. In this blog, we will look at some of the most common mistakes to avoid.
Not Having a Clear Agreement in Place
One of the biggest blunders encountered by business proprietors trying to buy out a partner is not having an agreement in writing setting the terms of the buyout. The reliance on a verbal agreement or informal discussion easily leads to misunderstandings or even potential legal disputes.
Make sure that you draft a proper agreement that sets out the buying price, payment terms, timelines, and other important matters surrounding the deal. This agreement should be drawn up with the help of legal professionals, making it complete and enforceable by law.
Inadequate Business Valuation
Finding the right price for the buyout is very important, and any error or biased valuation costs heavily in monetary terms. You should do a complete business valuation as well as find out the fair market value before buying out a partner in a partnership.
A reliable valuation also comes from hiring a reputable appraisal firm or business broker. It is also necessary to scrutinize financial statements, contracts, assets, liabilities, or any other relevant documents to ensure there is accurate and justified valuation.
Failing to Plan for Financing
Another big hurdle that many business owners ignore is financing the buyout. Whether you plan to fund the buyout using personal savings, borrow funds, or set up a payment plan, ensure your finances are in good order before you make any agreements.
Consult a financial advisor to consider various funding options. Ensure that the finance terms offered to you are favorable and realistic for your business cash flow.
Neglecting Tax Implications
Tax consequences remain the most neglected aspect while you are in the buyout process. Depending on the form in which you structure your transaction, the tax liabilities can be significant. Consulting a tax professional will help you understand how this would affect you and plan accordingly.
At this point, it is essential to consider both parties’ tax consequences and how the buyout will affect the company’s financials in the future.
Not Seeking Professional Guidance
Engaging in a partner buyout without sufficient legal, financial, and business expert advice can be an expensive mistake. Attorneys, accountants, and business brokers have the competency to advise and guide you in the complex negotiations of a buyout. They also ensure that your interests are protected in all transactions.
Key Takeaways
It is important to keep away from these common mistakes while buying out a business partner so that the process becomes easy and smooth. If you are considering a partner buyout, Adam Noble Group can give you all the guidance and expertise necessary for the entire process. Get in touch with us today and find out more.
NOTE: The sale of a business is confidential and discreet; PLEASE DO NOT VISIT THE BUSINESS OR SPEAK WITH ANY EMPLOYEES. We know about many businesses that are for sale but might not be advertised. Check out www.adamnoble.com for more information and consider registering your criteria as a purchaser.
ALL STATEMENTS, FIGURES, AND VALUES ARE SUBJECT TO A PROSPECTIVE PURCHASER’S DUE DILIGENCE. THE INFORMATION FURNISHED BY M&A ADVISOR ABOUT THE BUSINESS AND ITS FINANCIALS HAS BEEN PREPARED BY OR IS BASED UPON REPRESENTATIONS AND INFORMATION SUPPLIED BY THE SELLER. ADVISOR HAS MADE NO INDEPENDENT INVESTIGATION OR VERIFICATION OF SAID INFORMATION.
For information, reference Residential Re-Roofing Contractor for Sale 20511 and contact Jeff Adam, PE, MCBC, FRC, CBB at Adam Noble Group, LLC
Phone: (817) 467-2161
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For 3 decades, we have been guiding business owners and their families CONFIDENTIALLY to exit their construction trade contractor business with the BIGGEST paycheck of their life!
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Read: Insider Tips to Increase your Construction Trades Business Valuation
During 3 decades of M&A service, Jeff Adam has successfully completed the sale of over 825 businesses and advised or completed 1,000’s of business valuations and exit plans. An entrepreneur in his own right, he has started and grown 12 companies in fields including international finance, B2B services, business valuation, construction, screen printing, Mergers & Acquisitions, engineering, and manufacturing. Jeff has donated his time as a distinguished speaker at numerous national & international conferences since 1977 covering topics such as environmental services, engineering, media, craft breweries, exit planning, business valuation, charitable giving, management, business brokerage and M&A fields.
Jeff is President of Adam Noble Group, LLC, a national M&A Advisory firm, professionally valuing, exit planning, and confidentially selling profitable businesses owned by exit-motivated business owners to qualified strategic, corporate, private equity, partners, management, and financial buyers. The team establishes rapport, builds trust, and educates business owners in the steps to meet their goals as they prepare and achieve the discreet, confidential exit of their business. The firm exclusively represents sellers of $1M-50M value enterprises and endeavors to transfer their businesses to qualified, capable acquirers who will build upon the seller’s vision, goals, culture, and history. Jeff maintains lifelong repeat and referral relationships with sellers, their acquirers, and service providers.
Adam Noble Group has multiple M&A and business broker specialties: Manufacturing, Aerospace Defense Industry, Oilfield services, Technology, Construction trades, Craft Breweries, Partnership Buyouts, Service, and Wholesale Distributors.
We have successfully exited our own companies … we have walked in your shoes! Let us put the BIGGEST CHECK of your life in your pocket! Please contact us and we will confidentially answer all your questions. We will fully describe the process and answer all of your questions, all discreetly and with no pressure.
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