Buying Out a Business Partner in Texas

For most Texas LLCs a buyout is the only route that ends with the company intact and one owner gone,
and the reason is a single sentence of statute: a member of a Texas LLC cannot withdraw and cannot
be expelled
(Tex. Bus. Orgs. Code § 101.107).
There is no resignation and no vote that ends it. Absent a mechanism in the company agreement or a
court order, somebody buys somebody out or nothing changes. That rule governs LLCs; corporations and
partnerships have their own.

This guide runs in five parts. Four are below; the fifth, on the tax questions, is not yet published.
Start wherever your situation is.

Can You Force a Partner Buyout in Texas — Part 0.

For the owner whose distributions have stopped, who has been pushed out of management, or who wants
out of a company that will not let them out. It covers what Texas actually provides when there is no
willing counterparty: what the company agreement can do, what the two statutory routes require, and
why both of them are narrow by design.

Read this first if the honest answer to "will they negotiate?" is no. Parts 1 through 3 assume
they will.

Deciding on a Buyout and Pricing It — Part 1.

When a buyout is the right answer, how to prepare for the negotiation, and the twelve terms the
agreement has to address. The purchase-price section is the longest for a reason: everything else in
the deal is downstream of the number.

Structuring and Financing the Buyout — Part 2.

Whether the company redeems the interest or the remaining owners buy it personally, how installment
payments get secured, what happens to personal guarantees, and the risk provisions that decide what
the departing owner can do next.

Closing the Buyout and What Comes After — Part 3.

The twelve-document closing checklist, the filings and account changes people forget, and the
governance work that stops the next dispute.

Before you read any of them, find these:

1. The company agreement or partnership agreement — the executed copy with signature pages, plus every amendment. Whether it contains a buy-sell provision, and what fires it, decides more than any other fact.
2. The last two K-1s. If income is being allocated to you and no cash is being distributed, that is both a tax problem and evidence.
3. The last two years of financial statements, including owner compensation and any payments to entities the other owner controls.

If you cannot get the second and third, that is information too, and
transfer restrictions in LLC and partnership agreements
and redemption agreements in LLC and partnership exits
are the two adjacent pieces worth reading while you work on getting them.

A buyout that follows a freeze-out, a diverted opportunity, or a deadlock is a different project from
a buyout that follows a retirement, and the difference shows up in the valuation rather than in the
paperwork.
What a locked-in Texas owner can actually do covers that side, and
our Texas partner dispute practice is where the two meet.

The partner buyout field guide is the printable version of the
decision points in this series, in order, with the documents to gather and the valuation questions to
ask. It is written to be useful whether or not you ever hire a lawyer.

Disclaimer. This publication is provided by Amini & Conant, LLP for educational and informational purposes only and is not intended and should not be construed as legal advice. Should the reader seek further analysis of the subject matter or answers to specific questions about the subject matter, please contact the author at neema@aminiconant.com. This publication is considered advertising under applicable state laws.

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