Business Valuation Blog | Understanding Buying / Selling a Company

How Does the Valuation of Partnership Buyout Help Both Sides in a Dissolution?

Posted by Business Valuation Specialists LLC on Mar 22, 2019 8:00:00 AM


partnership buyout business appraisal

When you're dealing with the dissolution of a partnership, there are any number of issues that you need to deal with over the situation. However, one option you have to help deal with determining the value of the leaving partner's share in the business will help you through the process more easily. By getting the valuation of partnership buyout calculated by a professional business valuation specialist, you can focus on more important parts of the dissolution process, such as allocating duties and clients of the departing partner. 


How Does the Valuation of Partnership Buyout Help Both Sides in a Dissolution?

A partnership dissolution is a difficult process. Duties must be reassigned across the entire enterprise in a way that makes it possible to continue operations as seamlessly as possible. Clients must be contacted and moved on to other partners in a fashion that keeps them happy with the process. Their specific responsibilities of that partner must be audited for any number of issues that may have arisen over the years of operation. Any changes in staffing that needs to happen with the change of partners should be addressed before the partner leaves the firm.

Another area, one that is often the most contested during a partnership dissolution, is the value of the business and the value of that partner's buyout. The partner who is leaving may have invested significant time, effort and energy into the overall process of building up the business. They may have brought business to the company when they joined or built it up through their reputation for innovation or excellence. It can be a very difficult process to determine what that portion of the company's value should be allotted to that partner.

What's more, a partner who is leaving a company may feel that they deserve a reward, after a fashion, for all of their hard work. However, the remaining partners may feel that this is unfair to the remaining partners who are continuing to stay with the business in the future, and a fair distribution of the company's value requires that all parties be treated fairly. Additionally, there could be any number of other factors that have shifted the estimated value of the company over the years.

For this reason, having a partnership buyout valued provides that fair value for your business partners. It allows a third party to independently determine the overall value of your business as well as the departing partner's share in the business. It gives you the opportunity to get past the point of bickering over the potential value of the business and who is owed what in favor of fair market value. This value is determined by a trained, experienced professional who will be using methodologies that have been in place for decades in years of testing across many situations.

By having a valuation of partnership buyout performed, many companies are able to more easily get through the process of a partnership dissolution by avoiding problematic issues surrounding business value. However, if you want to ensure that you don't have to repeat the process, make sure that the calculations are performed by a certified business valuation specialist. This ensures that the report they generate follows established, tested methodologies that have been carefully developed over the years.

Topics: Partnership Buyout Business Appraisal