I am in the process of buying out my partner, for a few reasons that are legitimate. To start let me say we are in an oil related buisness. The problem is he invested 140,000 for 45% a year and half ago. The sales this yr have dropped by 35-40%. and he wants pretty much full investment back, 120,000. And he does want any responsibility for the debt procured during his partnership. My question is his percentage of debt during his time as partner supposed to come off of his buyout price?
It depends on how you defined your 'partnership'. Did you make a contract? What does it say? (If you didn't make a contract for a six-digit investment...)
The default would be a proportional participation, in all gains and losses. If the value would have doubled, he would want more back, right? So if the value decreased, he would get less back.
Unless he has a written statement that declares his risks as somehow limited, he has no chance to request more than a proportional share. But he surely can drag you through seventeen courts for the next umpteen years, until this is decided.
In a consensual sale, your partner's share is worth what someone pays for it. Which, obviously, implies a "meeting of the minds" between the partner and the buyer.
It's all negotiated, and all the "rational reasons" and talk in the world don't matter - it's all talk. At the end of the day, it boils down to a number. If you don't like his, throw down another. Yes, it's that dreary haggling thing. I hate it too.
In a forced sale administered by a court, it's a little more reason-based: both sides make their best pitch as to what the value should be, and the court decides.
This will be affected by some things. As any covenants in the business agreements about sale of shares. Your desire as an already-invested partner to keep a stranger out. Etc.