SALE OF PARTNERSHIP AGREEMENT
How to sell a partnership or buy into an existing partnership.
There comes a time in the life of any business when you, or one of your co-owners, may want to sell your interest in the business. If you are in a partnership, the issue of selling to another party is often a delicate one. Since you started the business with your partners, selling it to someone outside your circle may be difficult. Not only that, but the original partnership agreement may dictate special circumstances and procedures with which you must comply before a sale can be completed. If you want to sell your interests in a partnership, or want to buy a portion of an existing partnership, this is what you need to know:
- WHO CAN SELL A PARTNERSHIP? Any one who owns an interest in a partnership can potentially sell their interests to someone else. Of course, anyone interested in doing so must first consult the underlying partnership agreement. The agreement likely lists the steps that must be taken before a sale can happen.
- IF I’M IN A PARTNERSHIP, WHO CAN I SELL TO? Your ability to sell your interests in a partnership may be limited by the partnership agreement. Often, the partnership agreement will require that you first offer your partners the chance to buy your interests, or at least report the potential sale to them. It should also give them a period of time to allow them to decide if they want to make a counter or matching offer. Your partners may also be entitled to evaluate any new partner to decide their suitability.
- DO I NEED TO GET PERMISSION FROM MY PARTNERS? Probably. And not only that, but you must make sure they sign the agreement as well. Partners will usually be offered at least a right of first refusal when an interest in the partnership is up for sale to a new party.
- WHAT NEEDS TO BE IN A SALE OF PARTNERSHIP AGREEMENT? A Sale of a Partnership Agreement has to be able let the selling partner out of the organization, as well as admit the new party or transfer the interest to one of the existing partners. To do this, many specific clauses must be included into the agreement, including the price, the interest conveyed, the consent of the other partners, and more. The Sale of a Partnership Agreement must be specific in these matters so every party can be sure of the interest they are gaining.
- CAN I BUY INTO A PARTNERSHIP? Of course. But just as the rules of the partnership bind the current partners, if you buy into the organization, you too will be bound by those rules. And once you enter the partnership, you won’t be able to sell your interests without going through the same process the seller had to do when they sold their interests to you.
Like with any other property, selling an interest in a partnership requires that all sides are clear about the transaction. The fact that a partnership is a business entity with more than one person requires even more because the buyer will enter a business with pre-existing partners. To be sure your transaction is completed without difficulty, you will need to ensure your Sale of Partnership Agreement is drafted correctly.
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