What to Do When a Business Partner Wants Out?

No one goes into business with a partner thinking about how things might end—but sometimes, they do. Whether it’s due to burnout, retirement, a new opportunity, or personal reasons, it’s not uncommon for one partner to decide it's time to step away. If you’re the one staying behind, their decision can stir up a lot of uncertainty—financial, emotional, and legal.

It’s a pivotal moment for any business, but it doesn’t have to be a chaotic one. With the right steps, you can move through the transition thoughtfully and preserve the stability of your company and your own peace of mind.

Start With What You Know: Your Agreement

The first thing to do when a partner wants out is to revisit the foundation of your partnership. Do you have an operating agreement (for LLCs) or a partnership agreement that spells out what happens when one partner exits? If so, that document will likely provide instructions on how to proceed—think of it as your roadmap.

A well-drafted agreement may include:

· How and when a partner can voluntarily withdraw

· Valuation methods for their share of the business

· Options or requirements for the remaining partner(s) or the business to buy them out

· Payment terms or financing options for the buyout

If you don’t have anything in writing, you’re not alone—many small businesses start off with a handshake or a simple verbal agreement. But it does mean you'll need to look to state law (like the Oregon or Washington Revised Statutes) to fill in the blanks, which can be more rigid and less favorable to your goals. This is when having legal support is especially important.

Understand the “Why” Behind the Exit

Before diving into the logistics, take a step back and talk to your partner. Try to understand their reasons for leaving and what they’re hoping for in the process. Do they want to cash out entirely? Stay involved as a silent partner? Retain some influence over major decisions?

These conversations can be emotional, especially if you weren’t expecting the news. But taking the time to communicate clearly and openly now can prevent misunderstandings and legal battles later. It can also help set the tone for the rest of the transition—whether it’s collaborative or contentious.

Valuing the Business (and Their Share of It)

If your partner wants to be bought out, the next step is figuring out what their share is worth. This can be straightforward—or not—depending on how your business is set up and how profitable it is.

· There are several ways to approach a business valuation:

· Hiring a professional appraiser

· Working with a CPA who specializes in business valuation

· Agreeing together on a valuation formula (like a multiple of revenue or EBITDA)

It’s not just about the numbers—it’s about fairness. Getting an objective, third-party view can help prevent disputes and ensure that the departing partner is compensated appropriately, while also protecting the future of the business.

Planning the Buyout

Let’s say you and your partner agree on a price—what now?

Unless you have the cash sitting in a bank account (and most small businesses don’t), you’ll need to consider your financing options. Some common approaches include:

· A promissory note, where you pay your partner in installments over time, with interest

· SBA or bank financing, if you qualify

· A phased buyout, where shares are purchased gradually over a defined period

Whatever the structure, the terms of the buyout should be documented in a clear, legally binding agreement. This protects both sides and creates a smoother process moving forward.

Make It Official: Update Your Legal Documents

Once the exit terms are agreed upon, it’s time to update your business’s legal and financial records. That might include:

· Amending your operating agreement or partnership agreement

· Updating your registration with the Oregon or Washington Secretary of State

· Filing changes with the IRS, if necessary

· Adjusting your internal records, banking authorizations, and any third-party contracts

This is also a good time to review the remaining ownership structure and consider whether new roles, responsibilities, or equity distributions need to be addressed.

Looking Ahead: Protecting Your Business from Future Surprises

Even if the exit goes smoothly, it’s worth taking this experience as a lesson. Business partnerships evolve, and the more you can plan for transitions, the more resilient your business will be.

After your partner departs, consider taking the time to:

· Update or create a more comprehensive partnership or operating agreement

· Put a buy-sell agreement in place for remaining (or future) partners

· Get clear on succession planning and future exit strategies

Final Thoughts

A partner’s departure can feel like the rug is being pulled out from under you—but it can also be a chance to reset and strengthen your business. With clear communication, a solid legal plan, and a focus on long-term stability, you can manage the transition without losing momentum.

If you’re facing this situation and want help figuring out your next step, I’m here to guide you through it. Let’s talk.

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This article is a service of Dolev Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life & Legacy Planning Session,Ⓡ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.