In Texas, forcing a business partner to buy you out is generally possible if a buy-sell agreement exists, or if a specific legal situation arises where you can legally compel a buyout. This typically involves a pre-existing agreement outlining buyout terms or circumstances, or a triggering event like incapacity or misconduct.
Understanding Buyouts in Texas Partnerships
A voluntary buyout means one partner sells (or is bought out of) their ownership interest. In a voluntary buyout, both sides agree on terms: one partner retires or changes course, and the remaining partner or the company buys that share. These happen by mutual consent or through trigger events, like a planned retirement.
By contrast, a forced buyout is when a partner tries to make the other partner purchase their stake against their will. Under Texas law, you generally cannot compel a partner to buy you out just because you want out. Texas default rules are more about withdrawal or winding up the business than forcing one partner to buy another’s shares.
For example, in a general partnership any partner may simply withdraw at any time if they give notice and settle any outstanding debts, but one partner can’t insist the others buy their share.
And for an LLC, the law goes even further: Under TBOC §101.107, a member “may not withdraw or be expelled” unless the operating agreement says so. In other words, without an agreement clause or court order, a partner can leave or be removed only under specific legal situations, not by unilateral demand.
Is a Partnership Agreement Enforceable?
The single most important document is your partnership or operating agreement. These are official, enforceable documents required to form an LLC. Texas courts will honor any exit or buyout terms outlined in that agreement. If your agreement has a buy-sell provision or an exit clause, that is your roadmap.
Common provisions in buy-sell clauses include:
- • Right of First Refusal or Call Option: If one partner wants to sell, the other partner or the company has the first chance to buy the interest on set terms.
- • Triggering Events and Mandatory Buyouts: The agreement may say that certain events (death, disability, divorce, bankruptcy, or a partner’s misconduct) force a sale of that partner’s share. These rules ensure a smooth transition when specified events occur.
- • Valuation Mechanisms: Most buy-sell clauses spell out how to value a partner’s interest (e.g., fixed price formulas, appraisal by independent experts, or tying to an objective metric). This avoids disputes over price when a buyout is triggered.
If you lack any written buy-sell clause, Texas’s default rules won’t help you force a buyout. By default, one partner can withdraw and the business may continue or wind up—but no one else is obligated to pay them a purchase price. That’s why experienced Texas lawyers urge businesses to document exit rules in advance.
A well-crafted agreement can specify “if X happens, the remaining partners will buy out Y’s share at price Z,” which is far clearer than relying on general law.
When You Can Legally Push a Buyout (or Exit Another Way)
Even if there’s no voluntary buy-sell clause, certain situations can give you legal leverage. For example, if a partner breaches their duties, commits fraud, or otherwise wrecks the business, you may have grounds to seek relief in court. Texas law allows a partner to sue for breach of fiduciary duty or breach of the agreement.
- • Breach of Duty or Misconduct: If your partner is stealing, lying, or violating the partnership agreement, you can sue. A court might order them out of management or even award damages against them. Texas courts can grant immediate relief (like a temporary restraining order) to stop harmful actions. Ultimately, a court could force a separation of the partners by liquidating assets or selling the business if needed.
- • Deadlock or Frustration of Business Purpose: When partners are 50/50 or otherwise locked in a stalemate, business can grind to a halt. Under TBOC §11.314, a court can involuntarily dissolve and wind up a partnership or LLC if it is “not reasonably practicable to carry on the business” with the current owners.
- • Judicial Dissolution: Even absent misconduct, Texas’s business code allows a partner to petition for judicial dissolution of the partnership (or LLC) for any legal reason. A judge might then order the business’s assets sold and proceeds divided. This doesn’t force a buyout, but it ends the partnership so you can move on.
The bottom line: You cannot simply make your partner write you a check out of thin air. Texas business law doesn’t let you compel a partner to personally buy your share unless the contract or a court says so. Instead, your options are to rely on whatever buy-sell rules you have, or pursue legal remedies like suing for breach of duty or seeking judicial dissolution.
Alternatives to Forcing a Buyout
Instead of forcing a buyout, several alternatives can be considered for transitioning business ownership or addressing partner disagreements. These include selling the business, dissolving the partnership, or brokering a solution with an independent third party.
- • Negotiate a Settlement: Often the fastest solution is to talk it out. Even without a formal clause, partners can still agree to a buyout by mutual consent. Putting structured offers on the table might end the impasse without court.
- • Mediation or Arbitration: If direct talks stall, bring in a neutral mediator or arbitrator. These methods let you negotiate a solution confidentially and quickly.
- • Outside Financing or Sale: Could the company itself borrow money to buy out the partner? Could an outside investor be found? Even selling the business and splitting proceeds might net you what you want if internal buyouts aren’t feasible.
- • Stay Strategic, Not Emotional: High conflict can cloud judgment. Focus on business value, not personal wins. Courts favor reasonable solutions and documented attempts to resolve disputes without litigation.
What to Do If You Want to Remove a Partner from Your Business
Texas law protects your interests, but it rarely lets you force a partner to buy you out on a whim. Without a contract provision, the default may simply be winding up the business rather than forcing a private sale. Getting the outcome you want typically means a strategy—reviewing your agreement, negotiating terms, or using court-approved remedies for breach or deadlock.
If you’re unsure of your rights or how to move forward, Roquemore Skierski can help. Our business litigation attorneys have deep experience guiding Texas business owners through partner disputes, buyouts, and legal exits.
We’ll review your partnership or operating agreement, assess your options under Texas business law, and help you pursue the strategy that best protects your investment, whether that means negotiating a buyout, enforcing your rights in court, or restructuring the business for long-term stability.
Don’t wait. Contact our Dallas business lawyers today.