When Your Partner Wants Out: Buying Out a Veterinary Practice Partner or Selling in 2026?

Key takeaways

• A 50/50 interest is not automatically a discounted minority stake. Appraisers analyze lack of control and lack of marketability separately, then account for voting, veto, blocking, and swing rights.
• A whole-practice sale answers a different valuation question. It prices 100 percent of the practice, while a partner buyout values the specific interest and rights being transferred.
• SBA partner-buyout rules are conditional. For a complete buyout financed above 90 percent, SOP 50 10 8 makes the lender document 24 months of qualifying ownership and participation plus a pre-change debt-to-worth ratio no greater than 9 to 1, or calculate a cash contribution.
• The 2024 Connelly decision changed some insurance-funded redemption math. Practice-owned life-insurance proceeds counted in the estate-tax valuation in that case, and the redemption obligation did not offset them.
• A disengaging partner can narrow your options. Client visits fell about 3 percent in 2025, while peer-reviewed survey data shows 61 percent of veterinarians plan to reduce clinical work within 5 years.
• This article is information, not legal or tax advice. Every number here needs your CPA and your attorney on the specifics before either partner signs anything.

The conversation rarely starts with a resignation letter.

It starts sideways, over dinner after a conference. Your partner mentions that their spouse wants to be near the grandkids, or that their surgery back has maybe one good year left.

A few weeks later, the real sentence lands. I want out.

I’ve sat with enough owners in the weeks after that sentence to know the first instinct: pull up the practice financials and figure out what half costs.

The better first question is whether anyone should be buying this stake at all.

When a veterinary practice partner wants out in 2026, the owners have 2 workable paths.

Buy the departing interest at a negotiated or appraised value that reflects its actual rights and restrictions.

Or sell the whole practice and price 100 percent of the practice.

Funding, taxes, and your partner’s engagement level decide which path wins.

Do you have to buy out a partner who wants to leave?

No. A partner’s decision to leave does not automatically require you to fund a buyout.

Your obligations depend on the entity, governing documents, buy-sell agreement, and state law. If those authorities create no buyout right, price, terms, and timing remain negotiable.

That includes selling the whole practice together instead.

A buy-sell agreement is a contract between co-owners. It fixes what happens to a stake after death, disability, retirement, divorce, or departure and states how the price gets set.

Most owners never signed one. MassMutual’s 2022 owner survey found only 32 percent had a buy-sell in place.

That absence changes the negotiation. One owner generally cannot compel the other to sell an interest to them without authority in the documents or state law.

A co-owner may still seek judicial dissolution. If a court grants it, the practice may face a forced wind-up or liquidation.

The exact rights depend on the entity, documents, and state law. Bring in an attorney before positions harden.

Some partnerships pre-wired a resolution. Shotgun clauses let one partner name a price at which the other must either buy or sell.

A few agreements use sealed bids or an appraisal with a buy-at-125-percent or sell-at-75-percent option attached.

Most veterinary partnerships I see have nothing that specific.

So the price conversation starts from scratch. The valuation analysis below shows which facts matter first.

What should a veterinary buy-sell agreement cover in 2026?

A buy-sell agreement fixes what happens to an owner’s stake after death, disability, retirement, divorce, or departure. It states a price or pricing method for each trigger.

The 4 standard pricing methods are a fixed price, book value, a formula, or an independent appraisal. Hybrid approaches tend to age best.

Fixed prices go stale within a year or two. Formulas miss shifts in market conditions and growth prospects.

That is why accounting-firm guidance keeps landing on an independent appraisal, sometimes with a formula as the baseline and an appraisal override.

Veterinary partnerships have their own convention here.

Veterinary legal guidance says fair market value for internal transfers is often set by an appraisal. The documents may also define different treatment for different departure triggers.

If your buy-sell is funded with life insurance, the structure matters far more than it did 2 years ago.

In Connelly v. United States, decided unanimously in June 2024, the Supreme Court held that insurance proceeds received to redeem a deceased owner’s shares count as a practice asset for estate-tax valuation.

The redemption obligation does not offset those proceeds.

That ruling cost the estate involved roughly $900,000 in extra estate tax.

Advisors writing in The CPA Journal now steer estate-tax-exposed owners toward cross-purchase structures. The owners insure each other directly instead of having the practice own the policies.

Cross-purchase is simple with 2 partners: 2 policies. It scales terribly (5 owners would need 20 policies), but a 2-doctor practice is exactly where it works cleanly.

Is 50 percent of your practice worth 50 percent of the sale price?

Not automatically. A 50/50 interest is not always a simple noncontrolling minority block.

Appraisers examine a discount for lack of control when the interest cannot direct decisions.

They separately examine a discount for lack of marketability when the interest cannot be readily sold.

A 50/50 block may also carry blocking, veto, or swing rights. Those rights can change whether a control adjustment applies at all.

That makes the governing documents and state law central to the appraisal.

The 2 adjustments are not automatic, and their size cannot be taken from a generic range.

American Bar Association analysis shows why courts and experts examine control and marketability separately. The result is fact-specific and often contested.

Goodwill gets split too. Enterprise goodwill covers the reputation, client base, systems, and value that exist independent of any one doctor.

Personal goodwill covers an individual veterinarian’s skills and relationships. A January 2026 Oklahoma Bar Journal analysis shows courts rejecting valuations when experts failed to separate the two.

State law varies, so treat that as illustrative rather than a rule for your state.

Now hold the 2 outcomes side by side.

In a buyout, the appraisal values the specific interest and rights transferred. In a whole-practice sale, the process values 100 percent of the practice.

Same building. Same financials underneath. Getting the base number right matters on either path.

Our guide to valuing a veterinary practice walks through the EBITDA math. EBITDA means earnings before interest, taxes, depreciation, and amortization.

How do you fund a partner buyout under the 2025 SBA rules?

Most partner buyouts draw on 3 sources: an SBA 7(a) loan, a seller note carried by the departing partner, or practice cash flow over time.

The 7(a) program can finance complete or partial ownership changes, with a $5 million maximum loan.

That does not guarantee approval. The lender must apply SOP 50 10 8 to your transaction and document eligibility, repayment ability, and the required cash contribution.

For a complete partner buyout financed above 90 percent, the lender must document 2 conditions.

The remaining owner must certify active participation with the same or a higher ownership level for at least 24 months.

The lender must also document a pre-change debt-to-worth ratio no greater than 9 to 1.

If it cannot document both, the required cash contribution is the lesser of 2 amounts.

It is either the cash needed to reach 9 to 1 or 10 percent of the purchase price.

Partial ownership changes follow a separate 9-to-1 test and cash-contribution rule. Your lender must map the actual before-and-after ownership to the SOP.

A seller note is a loan from the departing partner for part of the price. It can bridge a funding gap, but its SBA treatment depends on the transaction and loan structure.

Have your lender, CPA, and attorney confirm the note’s payment, tax, and subordination terms before either partner relies on it.

State professional-ownership rules may also limit who can hold veterinary equity.

If a junior doctor is the intended buyer, confirm that ownership path with local counsel before solving the financing.

The mechanics look much like selling a veterinary practice to an associate.

How is a partner buyout taxed compared to a whole-practice sale?

Tax treatment starts with entity classification and transaction form.

If the practice is taxed as a partnership, Section 736 may govern payments to a retiring partner. Its categories and agreement language can produce different consequences.

Section 736 is not universal. A PC, corporation, or S corporation follows different stock, redemption, and shareholder rules.

A direct partnership-interest transfer is generally outside Form 8594 unless the transaction is treated as an asset acquisition.

A whole-practice asset sale may require Form 8594. The form reports how buyer and seller allocate the price across asset classes.

That allocation does not make goodwill or any other amount automatically qualify for capital-gain treatment.

Entity elections, basis, liabilities, payment character, and deal documents all matter. The same headline price can produce different after-tax outcomes.

This is information, not tax advice. Have a CPA and tax counsel model both paths before either partner anchors on a number.

Why does a departing partner shrink your sale window in 2026?

Buyers price a practice on trailing EBITDA and forward momentum. A disengaged partner erodes both.

Client visits fell about 3 percent in 2025.

Demand is the headwind. AVMA reporting on 2025 survey data found 81 percent of veterinarians seeing increased client cost sensitivity, up from 72 percent a year earlier.

AVMA also reported revenue growth of roughly 2.5 percent, driven by price rather than visit volume.

Watch what happens inside a 2-doctor practice once one doctor decides to leave. The pattern repeats.

The announcement comes, then a dropped half-day, then a dropped full day. Within 2 or 3 quarters, the departing doctor’s production has walked out before their name comes off the door.

Buyers may read that as concentration risk and price it accordingly.

In our experience, a practice showing 2 committed doctors clears a meaningfully better number than the same practice showing 1 doctor and a fade.

The wave behind you matters too.

Peer-reviewed survey data shows 61 percent of veterinarians plan to decrease clinical work within 5 years, and 31 percent plan to stop entirely. The mean anticipated retirement age is 64.

The urgency is not a claim that buyers are suddenly paying more. It is about protecting production and options before either one erodes.

Timing gets its own treatment in our guide on when to sell a veterinary practice.

Should you buy out your partner or sell the whole practice?

Buy the interest when you want at least another 5 years of ownership, the appraised or negotiated price is fundable, and you can replace your partner’s production.

Sell the whole practice when those conditions fail. A competitive sale tests the value of 100 percent of the practice.

Question	Partner buyout	Whole-practice sale
What gets valued	The specific interest, including its voting rights, restrictions, control, and marketability	100 percent of the practice, with proceeds allocated under the owners’ agreements and obligations
Who writes the check	You, via SBA 7(a), a seller note, or practice cash flow	The buyer wires funds directly at closing
Your position afterward	Sole owner, all upside and all risk	Paid at close, with negotiated transition terms
Tax shape	Depends on entity classification and transaction form; Section 736 applies only to partnership taxation	Depends on deal form; an asset sale may require Form 8594
Restrictive covenants	Only as agreed and enforceable under state law	Negotiated in the sale documents and subject to state law
Financing friction	SBA eligibility and cash contribution depend on the SOP facts and lender approval	Buyer funding and seller terms remain part of the negotiation

The buyout case is real when it fits.

An owner in their early 50s with a strong associate bench, enough cash to service the debt, and an appetite for another decade may buy the interest.

They keep all the future upside.

Flip any of those conditions and the sale starts winning.

If funding drains working capital, solo ownership was never your goal, or your partner has checked out, an affordable-looking buyout may mean buying more of a declining asset.

Selling well is its own discipline.

Our Elite Selling System hand-selects and vets every buyer who gets to bid, the way a doorman with a velvet rope lets in only the right people.

It then runs a private competitive bidding window inside that vetted group. That filter creates the leverage that moves the number.

Across the deals we’ve closed over the past 4-plus years, that process works best while the practice can still show stable production and a credible transition plan.

Our 2026 consolidator directory maps the current field of PE-backed groups if you want to see who is actively acquiring.

What to do next

Before you and your partner harden positions, get 2 numbers on the table.

First, what would the interest appraise for after its rights and restrictions are analyzed? Second, what could 100 percent of the practice clear in a competitive process?

I’ve watched owners argue for months over the first number without ever seeing the second.

We run that second number at no cost.

It takes one conversation and your recent financials. It usually reframes the discussion from “what do I owe you for your half” to “what do we each walk away with.”

Start with a free, confidential estimate of your practice’s value.

You’ll get a realistic estimate built from current buyer behavior on practices like yours, not a formula pulled off a website.

Our engagement model is success-based, with compensation tied to practice value. The estimate costs you nothing and commits you to nothing while you and your partner decide which fork to take.

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Frequently asked questions

My partner wants out of our veterinary practice. Do I have to buy them out?

A partner’s decision to leave does not automatically require you to buy their interest.

Your obligations depend on the entity type, governing documents, buy-sell agreement, and state law.

If those authorities do not create a buyout right, price, terms, timing, and a possible whole-practice sale remain negotiable.

Is 50 percent of the practice worth 50 percent of what the whole practice sells for?

Not automatically. Appraisers analyze lack of control and lack of marketability separately, but a 50/50 interest may carry blocking, veto, or swing rights.

Whether any discount applies, and how large it is, depends on the documents, rights, facts, and state law.

A whole-practice sale values 100 percent of the practice instead.

Can my partner force me to sell the practice, or can I force them out?

One owner generally cannot compel the other to sell an interest to them without authority in the governing documents or state law.

A co-owner may be able to seek judicial dissolution, and if a court grants it, the result can be a forced wind-up or liquidation.

Exact rights depend on the entity, documents, and state law, so involve an attorney early.

Can I use an SBA loan to buy out my veterinary practice partner in 2026?

Potentially. SBA 7(a) loans can finance complete or partial ownership changes, subject to lender approval and SOP 50 10 8.

For a complete partner buyout financed above 90 percent, the lender must document 2 conditions.

The remaining owner must certify 24 months of active participation at the same or a higher ownership level.

The pre-change debt-to-worth ratio must be no greater than 9 to 1.

If the lender cannot document both, the cash contribution is the lesser of the amount needed to reach 9 to 1 or 10 percent of the purchase price.

Partial changes follow separate rules.

What happens if we never signed a buy-sell agreement?

You negotiate everything from scratch: price, terms, timing, and the non-compete.

Only 32 percent of surveyed owners in MassMutual’s 2022 study had a buy-sell in place, so this is the majority case.

Expect an independent appraisal, expect the discount question to be contested, and get a CPA and attorney involved before either side names a number.

How is a partner buyout taxed compared to selling the whole practice?

Tax treatment starts with entity classification and transaction form.

Section 736 applies only when the practice is taxed as a partnership.

A PC, corporation, or S corporation follows different stock, redemption, and shareholder rules.

A direct partnership-interest transfer is generally outside Form 8594 unless it is treated as an asset acquisition; a whole-practice asset sale may require Form 8594.

Model both paths with a CPA and tax counsel.

Does my departing partner have to sign a non-compete?

Only if your agreements require one or you negotiate one.

The permissible scope, duration, and enforceability of restrictive covenants vary by state and by transaction.

Have an attorney review the governing documents and proposed covenant rather than assuming a standard term applies.

Should we just sell the whole practice to a PE-backed group instead of doing a buyout?

Consider a whole-practice sale when funding the interest would strain the practice, solo ownership is unwanted, or the departing partner’s production is already declining.

Compare a fact-specific appraisal of the interest with a competitive estimate for 100 percent of the practice before either owner anchors on one path.

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Sources

Tax and financing (government primary sources)

1. U.S. Supreme Court. Connelly v. United States, 602 U.S. (decided June 6, 2024). supremecourt.gov
2. IRS. “About Form 8594, Asset Acquisition Statement Under Section 1060.” irs.gov
3. Cornell Law School, Legal Information Institute. 26 CFR § 1.736-1, Payments to a Retiring Partner. law.cornell.edu
4. U.S. Small Business Administration. “7(a) Loans.” sba.gov
5. U.S. Small Business Administration. “Issuance of SOP 50 10 8 and Technical Updates.” sba.gov

Valuation and buy-sell research

6. American Bar Association, Family Advocate. “The Role of Control and Marketability Discounts in Business Valuation.” Winter 2025. americanbar.org
7. Oklahoma Bar Journal. “Business Valuation in Divorce Litigation: Practical Guidance on Classification, Timing and Goodwill.” January 2026. okbar.org
8. The CPA Journal. “Using Buy/Sell Agreements.” Nov/Dec 2025 issue; posted February 18, 2026. cpajournal.com
9. MassMutual. “2022 Business Owner Perspectives Study.” massmutual.com
10. Today’s Veterinary Business. “A Handshake Isn’t Enough” (Peter H. Tanella, Esq.). todaysveterinarybusiness.com

Veterinary practice operations, benchmarks, and profession data

11. AVMA News. “Veterinarians Report Increasing Price Sensitivity, Decreasing Visits.” February 13, 2026. avma.org
12. Frontiers in Veterinary Science. “Career Transition Plans of Veterinarians in Clinical Practice.” July 26, 2024. pmc.ncbi.nlm.nih.gov