Partner Buyout Waterfall Calculator

Partner buyouts follow operating agreement math. This calculator runs the waterfall.

FMV

Total debt

Exiting ownership %

Discount %

Accrued pref

Buyout price

$2,900,000

Pro rata value

$3,500,000

Discount dollar

$1,050,000

How the math works

Equity = FMV − debt. Pro rata = equity × ownership. Buyout = pro rata − discount + accrued pref.

Buy-sell provisions often include shotgun or right-of-first-refusal triggers. Before invoking a buyout clause, run both scenarios — sometimes the partner's shotgun response reverses who's the buyer and who's the seller, with no say in the outcome once triggered.

How to Use

Enter asset fair market value.
Enter total debt.
Enter exiting partner's ownership %.
Enter discount for minority/lack of marketability.
Enter accrued pref owed to exiting partner.
Read buyout price.

Frequently Asked Questions

Valuation approach?

Appraisal, market comp, or formula (NOI × cap, or book). Operating agreement specifies. Appraisal most common; market comp for liquid sectors; book rare. Method affects buyout price by 10-30%.

Discounts?

Minority discount (lack of control): 15-30%. Marketability discount (inability to sell easily): 15-30%. Combined: 25-45% below pro rata. Standard per IRS valuation and tax court precedent.

Payment structure?

Lump sum: clean but capital intensive. Seller note: 24-60 months at specified rate, often 1-2% above market. Earnout: price adjusted based on future performance. Each trades price clarity for capital flexibility.

What documentation matters here?

Written leases, move-in/move-out inspections with photographs, ledger entries showing every payment and charge, served notices with proof of service, and contemporaneous emails or texts. Courts weigh written evidence heavily; informal understandings rarely stand. Institutional operators run a monthly file audit to catch gaps before they matter. Good paper trails recover most of what's owed.