If I’m thinking of taking on a partner in my restaurant business, what is the best way to write our agreement up?

UPDATED: Sep 29, 2022

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If I’m thinking of taking on a partner in my restaurant business, what is the best way to write our agreement up?

I’ve owned it for 20 years. The new partner will buy 25% of the business at a price based on current value. Can I write an agreement saying that at anytime I reserve the right to buy back the 25% of the business? The buy back price will be based on the original price paid and adjusted up or down depending by how much the business has grown or not.

Asked on October 19, 2015 under Business Law, New Jersey


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

That attorney is wrong a contract can have a mandatory sell- or buy-back provision, which can require the other party to sell to you at any time, for a price as determined by the  contract. That's not to say that it would be easy to write for example, how will you value growth--revenue growth? or profit? what about increases in value of equipment, property, or inventory? the value of  the name and goodwill? etc. or that your partner would agree to it, but those are essentially "details," albeit important ones. There are also likely tax consequences to think through and deal with. However, to get back to the basic question, it is absolutely legal have a contract with a provision like this, and as long as you and your partner both agreed to it, it would be enforceable.
As for how to write it up...find another attorney to help you, one who understands that as long as the action is not intrinscially illegal e.g. not a crime, two parties can agree to any arrangement they want, even if it's not traditional or common.

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