Selling a portion of your business can become very complicated very quickly. Your wisest strategy is to seek the advice and counsel of a local business lawyer experienced in the buying and selling of companies. He or she can advise you of the precise steps you’ll need to take depending on what type of business you currently are, such as a sole proprietorship, partnership, corporation, etc. They can also help you value your existing business so as to determine a fair selling price for the portion you wish to sell. Finally, your lawyer can draft the necessary sale agreement and, if necessary, update your existing business documents to reflect the ownership change.
If you’re currently operating your business as a sole proprietorship, this means that, basically, you and your business are one and the same. You can therefore sell whatever portion of it you wish to whomever you wish for whatever price the market will bear or your buyer will pay.
You will need to change your business structure, however, from a sole proprietorship to a partnership or some form of corporation. Here again, your business lawyer can advise you of the tax and other consequences of such a change so you can make an informed decision. You would also do well to bring your intended buyer and his or her attorney into these discussions.
If you’re currently a partner in a partnership, it goes without saying that you can only sell that which you own. If, for instance, you have a 45% ownership interest in a partnership, you can only sell part of your 45%. On the other hand, before seeking out a lawyer, you may wish to consult with your partner(s) to see if they would be interested in giving up part of their ownership percentages in order to attract the capital that an additional owner will almost assuredly provide. In any event, the provisions of your existing partnership agreement will serve as the foundation of what can be sold, by whom, and for how much.
If your business is a corporation, you and anyone else with an ownership interest are actually shareholders, owning your respective number of shares. Depending on how many, if any, authorized shares are still outstanding, you may be able to sell those to a prospective buyer rather than giving up any of your own. You and your business lawyer will need to carefully review both your company’s articles of incorporation and bylaws to determine how to proceed.