You started out as a solid team, investing the time, money and effort needed to build a thriving New Jersey business. But like many businesses, changing circumstances as time goes on can put your partnership in jeopardy. A partner may wish to leave the business for any one of a number of reasons, such as health issues, interpersonal conflicts, loss of interest, or a lifestyle change.
When faced with partnership dissolution, a first step is often to conduct a business valuation. This helps ensure that the calculations and subsequent reporting are impartial, making it easier for partners to find common ground for the buyout terms.
A business valuation is simply a method of determining the fair market value of a company using one or a combination of the following approaches:
- Asset-based approach: a review of all the company’s assets and investments
- Earning value approach: based on the idea that a business’s value lies in its ability to produce wealth in the future
- Market value approach: attempts to establish the value of your business by comparing your company to similar ones that have recently sold
- Refer to your partnership agreement. All partnerships should have a legal agreement in place from the beginning but, oftentimes, that’s not the case. The partner buyout agreement makes the dissolution process much easier, by providing the necessary paperwork to define equity value and what is fair in buyout negotiations.
- Seek counsel from professionals and trusted advisors: These include attorneys, accountants, bankers, and other parties in whom you have placed your trust.
- Determine the payout terms of the exiting partner: Fair compensation is a given, but not at the expense of the remaining partner or to business liquidity. Payout options include lump sum buyout, installment payments, or financing options.
- Have your valuation done by a professional: Because of stress and emotions that are often associated with buyout situations, many courts demand that the fair market value be determined by a certified business valuation specialist — an independent third party who has no stake in either side of the partnership.
Why legal representation matters in partnership dissolution cases
The many intricacies of partnership dissolution and business valuation involve in-depth knowledge and effective management of legal, business and personal issues. At Weiner Law Group, our goal is always to maximize the investment and uphold the best interests of our clients, whether they will remain with the business or exit. A business dissolution that is not handled well can damage the business itself, along with the value of the owners’ interests. Contact Jay McDaniel and the Weiner Law Group team for experienced counsel in all matters of business divorce at (973) 602-3915.
Weiner Law Group serves clients throughout New Jersey with a wide spectrum of defense litigation services. Contact us should you have any questions or for a consultation on an impending action.