If 1 of 3 of our business partners is leaving our gym business, what’s the best way to assess her buy-out amount?

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If 1 of 3 of our business partners is leaving our gym business, what’s the best way to assess her buy-out amount?

One of 3 business partners is leaving the business and we are trying to put together a buyout amount. Does past hours spent on the business get valued and converted to dollars. We are offering her initial investment back plus 10% interest and possibly these hours worked on the business.

Asked on June 17, 2012 under Business Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

There is no single right way, since value varies business by business, and also according to the time line of the business: for  example, an amount fair to buy out one owner of a three member gym business is very different than the amount to fairly buy out, even at any early time in the company's history, a Microsoft founder.

Your methodology seems a reasonable one--investment, plus interest, plus some value for the time she put in. At the end of the day, however, since there is no official or single legal formula, whatever the three of agree to is fine. If you need outside help, try contacting a CPA with experience in valuing business.


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