Partner Buyout Estimator
Compare four buyout structures side-by-side: lump sum, installment, earn-out, and promissory note. See after-tax proceeds for the departing partner and total cost for the buying partner — including California capital gains treatment and non-compete allocation.
Built by a licensed mediator and CPA who has structured hundreds of partnership buyouts across entertainment, technology, real estate, and professional services.
Agreed-upon or appraised value of the entire business. Not sure? Use the valuation calculator first.
Payment for the departing partner not to compete. Taxed as ordinary income to the seller. Set to $0 if not applicable. Note: non-competes are generally unenforceable in California but can still have value in the deal structure.
Buyout base amount: $0
Frequently Asked Questions
How do I determine the value of my partner's share?
Start with a business valuation (appraisal or agreed-upon method in your operating agreement). Multiply by their ownership percentage. Add or subtract for any partner loans, capital accounts, guaranteed payments, or real estate held by the entity. If you can't agree on value, a neutral third-party appraiser is the standard next step — most buy-sell agreements require it.
What is the most common buyout structure?
For small businesses ($1M–$5M in value), installment payments over 3–7 years are most common because the buying partner typically can't access enough cash for a lump sum, and business cash flow is the funding source. For larger deals, a combination of upfront cash plus a promissory note is standard. Earn-outs are used when the partners disagree on valuation but want to avoid litigation.
How is a partner buyout taxed in California?
The departing partner's gain on their ownership interest is generally taxed as long-term capital gains (20% federal + 3.8% NIIT + 13.3% CA = up to 37.1% combined). However, payments allocated to a non-compete agreement are taxed as ordinary income (up to 37% federal + 13.3% CA). How the purchase price is allocated between goodwill, tangible assets, and non-compete has a significant impact on both parties' tax bills.
What if my partner refuses to sell or negotiate?
Options depend on your operating agreement and entity type. If the agreement has a buy-sell provision, follow its terms. If not: (1) Mediation — a neutral mediator helps you negotiate ($5K–$25K). (2) Shotgun clause — if your agreement has one, you can force a buy-or-sell decision. (3) Judicial dissolution — ask a court to dissolve the entity (CA Corp Code §1800). This is the nuclear option and destroys value. Before any of these, consult an attorney.
Going through a partner buyout or dispute?
Dennis Duitch is a licensed mediator and CPA who has guided hundreds of business partners through buyouts, restructurings, and dissolutions. As a neutral third party, he helps both sides reach a fair outcome while preserving the business's value.
MBA, Northwestern University · CPA · Certified Business Appraiser · Mediator · 30+ years of practice
Resolve Your Partner Situation
Estimate total business value before calculating the buyout
Mediation, buyout, dissolution, and judicial options
Cost, timeline, and outcome comparison
Real cost ranges by dispute type and complexity
Check your agreement covers these 30 critical items