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Guide: Exit Your Business | Strategy Three

Sell your shares to co-owners

Do you have a business partner still active within the business? Are you looking to exit the business and they aren’t? Consider selling your share of the business to your partner / co-owner. In most cases, ownership agreements contain various restrictions on what the partners can and cannot do throughout the partnership. For example, there may be a certain clause that states the co-owners have the “Right of First Refusal” or RFR to purchase the entire business before you can offer your share(s) to a third party.

Selling your share(s) to co-owners is typically the ideal and most straightforward out of all exit strategies, as your co-owners would already be involved in the ownership of the business. You already know your co-owners skill set, knowledge and commitment to the business before anything is signed. This type of sale also creates a lot of flexibility on everyone's part. For example, you could set up a gradual sale process that could span months or even years at a time. If cash is needed on your side and the co-owner has plenty of it (or can obtain it easily), making a quick handover of the ownership in a single sale may be the best route to go.

Frequently Asked Questions

Do you have questions about exiting your business? You should consider checking out our Resource Navigator. It houses the contact information of 400 of our most helpful partners from across the state who provide free to low-cost assistance to Iowa entrepreneurs and small business owners.

Q: Is selling to your co-owners a good idea?

A: If you have a good relationship with your co-owners (partners), this likely should be your first option. If your leadership team is still heavily invested in the success of the company, then selling your shares to them could be the best way to both keep peace and to see your company succeed for years to come.

Q: Do I have to accept less for my shares of the company because I am selling to a current business partner?

A: No, this is up to your personal preference and at the discretion of your legal counsel. 

Q: When is the right time to sell your portion of the business to a co-owner?

A: Whenever you decide you want out of your leadership role within the company.

 

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NOTICE: The information included on this website is to be used only as a guide. It is not intended to cover all provisions of the law or every taxpayer's specific circumstances.

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