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4 common exit arrangements in business

On Behalf of | Aug 2, 2023 | Business Law |

“Exit arrangements” refer to the strategies and agreements that business owners and investors use to leave their current position in a company. 

These strategies can be crucial to an orderly transition of power and control when someone wants to retire, liquidate their assets or just move on – for whatever reason. 

There are multiple different exit strategies that can be used. Here are some of the most common:

1. Selling off their stake

An owner/investor will often just decide to sell their stake in a business to someone else. When there are multiple owners/investors involved in a business, there are often existing agreements that dictate exactly how someone’s shares will be valued and who can buy them. When 

2. Going public

Sometimes owners/investors will decide to take the business public through an initial public offering (IPO). That means the owners/investors will offer up their shares as stocks that can be purchased by anybody, freeing the owners/investors to move on, if they choose.

3. Management or employee buyouts

Sometimes an owner decides to sell a business and finds that they have a willing buyer or buyers right in their workforce. The management team or employees of a company may decide to band together and buy the company together. This is a popular option when an owner wants to retire and they have long-term employees that they trust to keep the business operational.

4. Liquidation 

This can be a very straightforward process and fairly easy to accomplish. It’s often used by sole proprietors who want to get out of their current operation and move on to something more promising. This may or may not also involve bankruptcy, depending on whether the sale of the business assets will cover its debts.

There are more exit strategies than these, and understanding which method will best either protect the company’s future or limit your personal losses can be difficult without experienced legal guidance.