By 
The phone call usually comes on a Tuesday afternoon. A business owner explains that their partner just said they want out. Sometimes the partner wants to retire, sometimes there is a marriage falling apart, sometimes the two of them cannot work together anymore. Every Dallas business law attorney handling closely held company work has had this conversation, and the order of what happens next determines whether the relationship ends in a transaction or a lawsuit.
What follows is the practical sequence.
Slow Down Before You Talk Numbers
The instinct is to start with valuation. The right move is to pause. The first 48 hours are about protecting the company, not pricing the exit.
A few questions to answer privately before the next conversation:
- Who has signing authority on the company’s bank accounts?
- Who has administrator access to email, accounting, the CRM, file storage, and HR systems?
- Are vendor or customer relationships managed exclusively by the departing owner?
- Does the departing owner have an active employment agreement, and what does it say about resignation, garden leave, or non-compete?
- Has the departing owner already spoken to employees, customers, or banks?
Nothing here is hostile; it is operational. A negotiation that begins after $200,000 has moved out of the operating account, or the customer list has been copied to a personal laptop, is a different negotiation than one that starts cleanly. Quiet conversations with the bank, IT, and key managers prevent the incidents that turn buyouts into litigation.
This is also the moment to put a written litigation hold in place if any dispute looks possible. Preservation duties begin when litigation is reasonably foreseeable, not when a suit is filed.
Read the Documents That Already Exist
The next step is to assemble the governing documents and read them carefully, in this order:
- Company agreement (LLCs) or shareholder agreement and bylaws (corporations)
- Any buy-sell agreement
- The departing owner’s employment or consulting agreement
- Certificate of formation
- Loan agreements, supplier contracts, and material customer agreements with change-in-control provisions
If a buy-sell agreement exists, it almost always controls valuation method, timing, funding, triggering events, and procedure. The agreement is the starting point, and any negotiation that ignores it creates risk for both sides.
Bank loan covenants are often overlooked. Many SBA loans and bank facilities for closely held businesses make an ownership change above a stated threshold an event of default. Getting an advance waiver from the lender is much easier than asking forgiveness later.
How Valuation Actually Gets Negotiated
If the documents set the method, follow it. Where they do not, a few Texas-specific points come up in most buyouts:
Fair value versus fair market value. Texas treats these differently. Fair value is generally undiscounted (no minority or marketability discount), while fair market value applies the discounts a hypothetical third party would. If the agreement says “fair value” and an owner is buying back a minority interest, the price is meaningfully higher. This single word often decides the negotiation.
EBITDA multiples. For a Dallas service business, three to six times trailing EBITDA is typical, with adjustments for owner compensation above market, one-time expenses, and working capital. A stable medical practice trades higher than a project-based contractor.
Appraisal mechanics. Each side picks an appraiser. If their values land within a stated percentage of each other, they average. Otherwise a third appraiser sets the number or chooses between the two.
Bring in a credentialed appraiser (ASA or CVA) early when the number is contested. An exchange of valuation memoranda often settles a buyout faster than litigation.
Structuring the Buyout
Few closely held buyouts get paid in a single check. The typical structure includes an upfront cash payment funded by company reserves, a bank loan, or insurance proceeds; a promissory note for the balance over three to seven years; personal guarantees from the remaining owners if the balance sheet is not strong enough on its own; tax allocation addressing asset-versus-equity treatment; and a mutual general release through closing.
Non-compete and non-solicitation covenants tied to the sale receive more favorable treatment under Texas law than employment-based covenants. A defined transition period with specific deliverables prevents the most common post-closing disputes.
Earnouts can bridge a valuation gap but create their own litigation risk, since the departing owner has limited control over performance after closing. Use them with specific metrics and an audit right.
When the Documents Are Missing
Sometimes the call begins with “We never put anything in writing.” That is the harder case.
Without a buy-sell or company agreement that addresses departure, the Texas Business Organizations Code provides little support. An LLC member generally cannot withdraw and demand fair value unless the company agreement says so (Section 101.107 and related provisions). A Texas corporate shareholder has even less. A departing owner who threatens litigation usually relies on fiduciary duty claims, oppression theories (narrowed after Ritchie v. Rupe), or accounting demands. The remaining owners often have little ability to force a sale.
The result is a negotiation driven by leverage rather than rules. Both sides usually have reasons to settle: the departing owner wants liquidity, the remaining owners want clarity. A reasonable deal usually exists if the conversation stays out of court.
Working With a Dallas Business Law Attorney
The buyout you negotiate is the contract you live with for years. Promissory notes run half a decade. Non-competes, releases, and transition obligations have to hold up against later second-guessing.
For background, the Texas Business Organizations Code is published at statutes.capitol.texas.gov, and the State Bar of Texas Business Law Section publishes practice guides on closely held transactions. Before sending the first written offer or signing a term sheet, a working session with a Dallas business law attorney is the cheapest insurance available.
The moment a co-owner says they want out is rarely the moment to negotiate price. It is the moment to slow down, protect the company, read the documents, and then have the conversation.
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