Originally Posted by Redrob

Anytime I've had a partnership we have set it up as a Subchapter S Corp. Then, I've set up a "Chinese Buyout" so that if somebody want out or to end the partnership, the agreement is in place. We make the buyout arrangements part of the bylaws of the corporation.

The way it works is that the terms of the buyout are agreed to in advance, not just the amounts; but, length of option period, percent down, interest rate, length of payout, etc.

Then, the way it works is as follows:

A and B are shareholder in JB, Inc.

B decides he can no longer work with A and wants to go it alone.

So, B tells A, "I will buy you out for $10K."

A now has 10 days to either:

Buy out B for $10K and own 100% of the business, or
Take the $10K and leave the business to B.

Using a Chinese Buyout lessens the chance of somebody lowballing you as you would have the first option to buy them out on the same terms.

Also, if you can't stand to be around them anymore, make an offer and somebody is going to leave. If you don't have the business, you got the cash...

It works.