My partner is buying me out of a 50/50 Ltd Co. How do I value my share?

[JonnyMac82]

We started a successful plumbing & heating company about 6 years ago with the shares split evenly, 50% each. My partner initially invested £10k and I put in £8k. Over the course of the last 6 years we were able to get back some of our initial investment. As my partner had help from his parents I agreed to help him pay them back as quickly as possible. We treated the monies we’d invested as interest free loans. So now the company still owes my partner £2k and I’m still owed £5k.
RecentIy I had to stop work due to health reasons and agreed to sign my half of the company over to him. We didn’t talk about the financial implications of this and I know he doesn’t know much about that. He’s a good friend and I’m not expecting him to give me my share in a lump sum as that would put him out of business. Am I right in thinking that my share would be half of all the assets after the £7k (the remainder of our initial loans to the company). Where can I find the legal and financial process of this kind of buy out so I can explain it to him without either of us requiring legal advice. I want to do it as amicably and fairly as possible. Also if he can’t pay in a lump sum can interest be applied and at what rate? If anyone has any advice or thoughts I’d be grateful as I’ve been putting it off till I really know how to explain it to him. Thanks.

 

[Scalloway]

How do I value my share? By finding out how much somebody is willing to pay for it.

And not taking legal advice may be creating problems for you and your partner.

 

[Nico Albrecht]

Not sure what your definition of successful is but an 18K loan not paid back in full after 6 years does not sound the business is actually running well and generating money.

Anyway, my advice is ask him what he thinks is fair. Let him come back to you with an offer it might be better than what you would expect.

 

[obscure]

The value of your shares is whatever the two of you agree it is - or "whatever someone agrees to pay you".

 

[Mr D]

Agree with obscure.

The shares are worth to you what you agree to accept in exchange for them.
£1 for the lot. £30k for the lot. More. Less.
You have to agree to sell at the price the other side is willing to buy for. Otherwise you keep the shares unless you have an agreement stating otherwise.

 

[paulears]

Also consider asking your accountant, because a third party helps prevent you two falling out. The accountant knows how much the business is worth, so can provide a financial viewpoint. things like a 50/50 split. 50% of what, exactly? With unequal investment and unequal physical input, how is the 50/50 quantified? If the funding going in was a 60/40 split, but your money coming out was a 40/60 split, calculating the residual worth will be complex. Hopefully you considered this when setting it up?

 

[Mark T Jones]

Much like the above

Personally I’d separate the loan from the valuation - turn it into a fixed, repayable loan then negotiate the share purchase over a period of time