5 minute read

Buying a Business With a Partner: What Buyers Need to Get Right Before the LOI

Partnership symbol of handshake on wooden cubes.

Buying a business with a partner sounds smart on paper: more capital, shared risk, complementary skills. Greater odds of success, right? In practice, partnership deals either enable transactions that wouldn't otherwise happen or implode after months of effort.

From a buyer's side, the difference usually comes down to how clearly roles, control, and exit paths are defined before emotions and money enter the picture.

Here's what buyers need to think through before committing to a joint acquisition.

Why Buyers Partner Up in the First Place

Most buyers form partnerships for valid reasons:

The deal is too large for one buyer alone
Financing constraints require pooled equity
One partner brings capital, the other brings operating expertise
SBA or bank requirements favor shared guarantees

Problems arise when buyers stop there and assume that goodwill will fill in the gaps.

Capital Contributions vs. Control

This is where partnerships start to veer off course.

Many buyers assume ownership percentage equals control. It doesn't. Control lives in the operating agreement, not the cap table.

Key questions buyers must answer early:

Who makes day-to-day decisions?
Who controls hiring, firing, and compensation?
Who approves capital expenditures? What is the line for expenditures that must be approved jointly vs. at each stakeholders discretion?
What decisions require unanimous consent?

A 50/50 split without defined authority often leads to paralysis or ongoing friction. A 60/40 split without voting protections can create resentment. Buyers should look to align control with responsibility, not just with financial investment.

Operating Partner vs. Financial Partner

Most buyer partnerships fall into one of two structures:

Operator + capital partner
Two operating partners with different skill sets

Both work, but only when expectations are explicit.

If one partner runs the business, that role needs:

Clear authority boundaries
Defined compensation separate from distributions
Protection from micromanagement

If both partners operate, responsibilities must be divided cleanly. Overlapping authority creates friction that can leak into performance and lender confidence. For example, lenders underwrite people alongside financials. This means they take business plans into consideration during the pre-approval process or for refinancing. In a recent transaction, two buyers were partnering on a 50/50 acquisition with overlapping authority across operations, hiring, and vendor decisions. Lenders evaluate whether management structure supports efficiency, especially in service businesses where margins depend on it. There is a chance a lender could reduce leverage and require a stronger personal guarantee, not because the business is weak, but because overlapping authority blurs accountability and increases risk.

SBA and Lender Considerations for Partner Deals

Lenders pay close attention to partnerships, especially post-2025 SBA changes.

For SBA-backed deals:

Any owner at 20% or more must personally guarantee the loan
Citizenship and eligibility rules apply at the ownership level
Control must align with underwriting assumptions

Banks want to see clarity. Ambiguity around leadership, guarantees, or decision-making slows approvals or kills them outright.

Exit Scenarios Buyers Rarely Plan For

Most partnerships don't end because the business fails.

Buyers need answers to uncomfortable questions:

What happens if one partner wants out?
Who sets the price if someone wants to exit?
Can the company force a buyout?
What happens if one partner stops contributing?

Buy-sell clauses, valuation formulas, and funding mechanisms should be written into the partnership agreement. Most buyers focus their partnership agreement on ownership splits and profit distributions, then stop there. They assume goodwill will handle the rest. The real risk comes from life events that force decisions when partners least want to make them. Continuity should be outlined, which follows divorce, disability, and death. Buyers who skip this step end up negotiating under pressure, when trust and leverage no longer exist. Addressing these triggers in advance with mandatory buyouts, defined valuation formulas, and pre-planned funding mechanisms puts buyers in a better position, even if they don't need to use them.

The Broker's View

From the buyer's side, partnership deals succeed when both parties agree on the future without setting things aside to "cross that bridge when they get there".

The best partnerships seem extensive on paper because everything is spelled out. The worst rely on trust alone. Trust matters, but structure keeps deals alive when circumstances change. If you are a buyer partnering on a deal, make sure you work with a team of people who know the process: engage with business brokers for the transaction and tie in experienced attorneys for the legal structure.