Partner Buyout Calculator

Start with what the agreement says

If the partnership or operating agreement sets a price, a formula or an appraisal process, that governs, and the "Agreed price" method is the one to use. Without one, a general partnership falls back on its state's partnership act. Unless the departure dissolves the partnership (in a partnership at will, notice from any partner does, §801(1)), under the Uniform Partnership Act (1997) §701(b), a departing partner is owed what they would have received if the assets had been sold at the greater of liquidation value or the value of the whole business as a going concern without that partner, with interest from the date they left; if no price is agreed within 120 days of a written demand, the partnership must pay its own estimate (§701(e)). An LLC member who leaves has no such right by default, which is one more reason the agreement should say. Writing the exit clause before you sign covers the wording.

The four ways to value the business

• Seller's discretionary earnings (SDE) times a multiple. SDE is profit before one owner's pay, interest, taxes, depreciation and one-off costs: the cash one working owner could take out. Where two partners both work in the business, the second one's pay at a market wage stays a cost, or the multiple is applied to earnings counted twice. It is how most businesses under a few million in value are priced. The default multiple, 2.65, is BizBuySell's average for the second quarter of 2026; a business with steady recurring revenue and no dependence on the departing partner earns a higher one, a business that is the departing partner a lower one.
• EBITDA times a multiple. Earnings before interest, taxes, depreciation and amortization, after paying market salaries for the work the owners do. Larger companies are priced this way, and at higher multiples: GF Data reported private equity deals of $10 million to $25 million closing at 5.9 times trailing EBITDA when the buyer had a quality of earnings report. The 4.5 default sits between the two sets of figures and is a placeholder, not a market reading.
• Book value. Assets less liabilities on the balance sheet. It suits a holding company or an asset-heavy business with thin profits, and it understates almost any business that earns well, because a balance sheet carries no value for customers, staff or reputation.
• Agreed price. The figure in a buy-sell agreement's annual certificate of value, an appraiser's number, or what the partners settle on.

Multiples of SDE and EBITDA value the operating business as if sold free of debt. In a partner buyout the business keeps its loans, so the calculator subtracts the debt it keeps, net of its cash, before taking the departing share. How to value a partner's share goes through each method with an appraiser's eye.

Discounts for a minority stake, and why they are fought over

A buyer of a minority stake cannot control the business and cannot easily resell the stake, and appraisers price both. Restricted stock studies put the discount for lack of marketability at an average of 13% to 45% (ABI Journal), and the average discount for lack of control has been put at about a third of the value of controlling shares (Florida Bar Journal). Applied one after the other, a 15% and a 20% discount take 32% off.

That is why the remaining partner likes them and the departing one does not, and why a buy-sell agreement should settle the question in advance, one way or the other. Some statutes do too: in a shareholder appraisal, Virginia's corporation law sets fair value "without discounting for lack of marketability or minority status" (Va. Code §13.1-729), and Florida does the same for a corporation with ten or fewer shareholders. The calculator leaves them off unless asked, which is the fairer default between partners who built the business together.

How the payments are worked out

Each loan is a fixed-rate loan repaid in equal monthly payments: payment = loan × r ÷ (1 − (1 + r)⁻ⁿ), with r the annual rate divided by 12 and n the number of months. A seller note can start with a standby period in which nothing is paid; if interest builds up meanwhile, it is added to the balance and the note is repaid over its full term once payments begin. The schedule under the calculator shows each year's payments, the interest in them and what is still owed, and the total cost line is the price plus all the interest.

Say the share is priced at $530,000, 20% is paid at closing and the departing partner carries the rest on a five-year note at 7%. That note of $424,000 costs about $8,400 a month and about $80,000 in interest over the five years: the partner who leaves is, in effect, also the bank, and should want security for it (a pledge of the bought interest, a personal guarantee, a default clause that accelerates the balance).

Using an SBA 7(a) loan under the October 2026 rules

The SBA's lending rules changed on October 1, 2026, when SOP 50 10 8.1 replaced the earlier version for loans numbered from that date; the change-of-ownership rules now sit in Appendix 15 of the SOP. As they stand for a partner buyout:

• At least one of the original owners must stay and personally guarantee the loan. Where the remaining owners buy the whole of another owner's interest, they must have been actively running the business for at least the last 24 consecutive months.
• The buyers must inject equity of 10% of the purchase price, which the lender may reduce or waive if the business has enough liquidity and working capital, and only if its balance sheet did not show a negative net worth at the last year end.
• A seller note can supply no more than half of that 10%, and only if it is subordinated and on full standby, with no payments of principal or interest for the whole term of the 7(a) loan. A note being paid during the loan does not count.
• A selling owner who stays on with less than 20% must guarantee the full loan for at least two years after it is disbursed.
• The lender wants earnings of at least 1.25 times the debt payments.
• The rate on a variable-rate loan over $350,000 is capped at the base rate plus 3 points. With the prime rate at 7.00% in late September 2026 (FRED), that is 10%, the calculator's default.

Put a share in the SBA loan box and the calculator checks the equity injection: cash at closing, plus the seller note only if its standby covers the whole SBA term, and then only up to half. It also shows the coverage a lender reads: earnings over the first year's loan payments. On earnings alone that figure flatters the buyout, because SDE is profit before any owner is paid, and the remaining owners still have to live; a lender takes their salaries out first. Enter the pay they need each year and the calculator subtracts it before dividing, then sets the result against the SBA's 1.25 times. With EBITDA, enter only pay above the market salaries it already counts as costs. Say the business earns $400,000 of SDE, the partner who stays needs $150,000 a year to live on, and the first year's payments on a $424,000 note are about $100,750: earnings alone cover the payments 3.97 times, but after the owners' pay it is $250,000, or 2.48 times. How to finance a partner buyout compares the SBA route with bank loans, earnouts and paying out of profits.

Seller note, SBA loan or earnout

Under the schedule, the calculator pays the same price three ways, with the same cash at closing. The seller note column is the note as entered above, standby included. The SBA column borrows the rest at the SBA rate and term above, and raises the cash at closing to the 10% equity injection if it is below it. The earnout column pays the departing partner a share of the business's profit or revenue each year for the years chosen, with nothing fixed: the first year is today's figure moved by one year's growth or fall, and each year after by another, in a flat case, an up case and a down case. With SDE or EBITDA above, the profit starts from that figure, less the pay the remaining owners need if it is entered; SDE is before any owner is paid, so enter that pay or type the profit an earnout would actually be measured on.

Say the share is $530,000, 20% ($106,000) is paid at closing, and the business makes $400,000 a year. An earnout of 25% of profit for five years pays $100,000 a year if profit stays flat, $606,000 in all with the cash, more than the price. If profit grows 10% a year it pays $777,561; if it falls 10% a year, $474,559, about 90% of the price. Paying exactly the $424,000 left after closing in five flat years takes 21.2% of profit, and the calculator gives that figure for whatever is entered. Every number in the table moves with the inputs, and the summary prints on one or two pages; Copy link saves the whole set in the address, for a partner or an adviser to open as you left it.

Earnouts are uncommon in partner buyouts, for reasons in their design. They are a tool for selling a company to an outsider: in private acquisitions, earnouts appeared in 24% of deals in 2025, against a historical average of about 20%, by Fasken's summary of SRS Acquiom's 2026 Deal Terms Study, and outside life sciences they paid about 21 cents for each dollar they could have paid (SRS Acquiom, Earnouts and Claims Study). Between partners the case for one is weaker and the costs are higher:

• An earnout bridges what a buyer and a seller do not know about the future. Partners who ran the business together know the same things, so there is less of a gap to bridge.
• After closing, the remaining partners set the salaries, the spending and the reinvestment that decide the profit the payment is measured on. The departing partner is paid by the people they are leaving, out of figures those people control, and how a figure was calculated is what earnout disputes are about.
• The partner leaving usually wants a clean break: a fixed price, security for anything owed, and release from the personal guarantees on the business's loans.
• An earnout cannot sit beside an SBA loan. Appendix 15 of SOP 50 10 8.1 says "Seller earnouts are prohibited" in a 7(a) change of ownership; a rebate from the seller to the buyer, tied to performance, is allowed, and has to go toward paying down the loan.

Where partners do use one, it works best as a small part of the price on top of a fixed one, measured on revenue (harder for either side to move than profit), with the accounting rules, the departing partner's right to see the books, and a cap written into the agreement.

What the calculator leaves out

Taxes, first: how the price is split between the partnership interest and payments for the partner's share of profits changes who pays what, and that is a question for an accountant before the agreement is signed. Taxes when a partnership interest is sold sets out the rules. It also leaves out SBA guarantee fees and closing costs, life insurance proceeds where a buy-sell agreement is funded that way (buy-sell agreements), and the departing partner's personal guarantees on the business's existing loans, which a bank will not release just because the partners have agreed a price. For the whole process in order, see how to buy out a business partner.

General information, not legal, tax or lending advice. The partnership agreement and the state's law decide the price and terms, an SBA lender decides what it will lend, and a lawyer in your state should read the buyout agreement before it is signed.