Financing the buyout of a partner's shares: the options compared

Once the exit price of a partner is agreed, one question often holds up the signature: who pays, with what money and at what tax cost? The four possible structures do not place the same cash burden on the remaining partner or on the company.

Quick answer. To finance the buyout of a partner's shares in France, four structures coexist in 2026: a personal purchase by the remaining partner, a share buyback by the company followed by a capital reduction, a leveraged acquisition holding company, and vendor financing. For an individual seller, the gain is taxed as a capital gain (31.4% flat tax in 2026); the real difference lies on the buyer's side.

This article covers how to finance the price. How to set that price is explained in our article on the exit of an operating partner and calculating the buyout price, and the human and legal handling of the departure in the one on a co-founder leaving without blocking the company.

The buyout of a partner's shares can be financed in four ways: the remaining partner buys with personal funds or a personal loan, the company buys back and cancels the shares, an acquisition holding company borrows and buys, or the seller agrees to be paid in instalments (vendor financing, crédit vendeur). These routes are often combined, for example a holding company funded by a bank loan topped up with vendor financing.

The decisive criterion is simple: which euro repays the debt, and how much tax has it borne before getting there? A euro of profit that travels up to the remaining partner's personal wealth bears corporate income tax (impôt sur les sociétés, IS) and then the flat tax (prélèvement forfaitaire unique, PFU). A euro that stays inside a company subject to IS bears corporate tax only, or nearly so.

Yes, a French company can buy back a partner's shares provided it cancels them as part of a capital reduction not caused by losses (réduction de capital non motivée par des pertes). In a SARL, article L223-34 of the Commercial Code (Code de commerce) prohibits in principle the purchase of its own shares, but allows the meeting that decides this reduction to authorise the manager to buy a set number of shares in order to cancel them. For joint-stock companies (SA, SAS), article L225-207 provides the same mechanism.

A capital reduction not caused by losses is a transaction in which the company reduces its share capital by repaying partners, although it has no losses to absorb. The procedure is detailed in our article on capital reductions not caused by losses. Three constraints weigh on the financing:

1. Creditors may object. In a SARL, article L223-34 gives prior creditors a right to object, and the reduction cannot start during the objection period.
2. Equality between partners must be respected. Article L223-34 states that the reduction may not undermine the equality of partners, which in practice requires the other partners' agreement when the company buys from only one of them.
3. The company must be able to pay. The price comes out of cash and, above par value, reduces equity. A company that empties its reserves to buy out a partner weakens its future borrowing capacity.

How is the departing partner taxed?#

Since 1 January 2015, a company's buyback of its own shares is taxed in the hands of an individual partner under the capital gains regime only. This rule comes from article 88 of amending finance law no. 2014-1655 of 29 December 2014, adopted after Constitutional Council decision no. 2014-404 QPC of 20 June 2014. Article 112, 6° of the French Tax Code (CGI) excludes these sums from distributed income, and the gain falls under articles 150-0 A et seq.

The taxable gain is the difference between the buyback price and the acquisition price of the shares. In 2026, the flat tax is 31.4%: 12.8% income tax and 18.6% social levies, with an overall option for the progressive income tax scale.

The underestimated risk. Many business owners still have in mind the former "hybrid" regime, which taxed part of the buyback as a dividend. That regime disappeared for buybacks carried out since 2015. The real issue is no longer how the seller is taxed, but the company's financial strength after the payment, and a price consistent with the actual value of the shares.

A personal purchase makes sense when the price is modest compared with the remaining partner's savings, or when the company can neither buy back shares nor pay dividends to a holding company on good terms. It is the simplest structure legally: a share transfer between two people, one deed, and possible registration duties depending on the company's legal form.

Its drawback is tax. A personal loan is repaid out of income that has already been taxed. If the remaining partner repays with dividends, each euro has first borne corporate tax within the company, then the 31.4% flat tax on the way out.

Interest on a personal loan is, in principle, not deductible. There is one exception: according to the BOFiP (the official French tax guidance), an employee or executive who opts for actual expenses (frais réels) may deduct interest on a loan taken out to acquire shares in the company where they carry out their main activity, if the acquisition helps them obtain or keep their remuneration. There must be a direct link between the employment contract or corporate office, the share purchase and the loan: the deduction must be checked case by case.

A holding company is not required to buy out a partner, but it becomes the reference structure when the price is significant and the company generates regular profits. An acquisition holding company (holding de reprise) is a company subject to IS, set up to acquire the shares and carry the acquisition debt, which is repaid with the target company's dividends.

The standard structure for a partner exit runs as follows:

1. The remaining partner contributes their own shares to a holding company they control. The capital gain on contribution may qualify for the tax deferral applicable to contributions to a company controlled by the contributor (article 150-0 B ter CGI), subject to conditions: if the holding sells the contributed shares within three years, it must reinvest at least 70% of the proceeds within three years (sales since 21 February 2026).
2. The holding company borrows from a bank, possibly with a Bpifrance guarantee, and buys the departing partner's shares.
3. The holding then owns the entire share capital and repays the loan with dividends paid up by the subsidiary.

Two tax regimes make this circuit efficient. The parent-subsidiary regime (régime mère-fille), available for holdings of at least 5% of the capital kept for two years, exempts dividends received except for a 5% share of costs and expenses (article 216 CGI). Tax consolidation (intégration fiscale), available when the holding owns at least 95% of the subsidiary (article 223 A CGI), allows interest on the acquisition debt to be offset against the subsidiary's profits.

This interest remains subject to the general cap on net financial expenses in article 212 bis CGI, set at the higher of €3 million or 30% of tax EBITDA, a threshold rarely reached by an SME. The practical steps are detailed in our article on using an acquisition holding company to buy an SME.

Points to watch. The target company may not advance funds, grant loans or give security for the purchase of its own shares by a third party (article L225-216 of the Commercial Code): the debt must sit with the holding company. If the remaining partner also sells part of their own shares to their holding, the rule in article 223 B CGI (known as the "Charasse amendment") can reduce interest deductibility within a tax group: this must be analysed before signing.

Vendor financing is the deferred payment of part of the price, granted by the seller to the buyer. It reassures the bank, which sees the seller sharing the risk, and reduces bank debt. A detailed comparison is available in our article on vendor financing versus a bank loan for an SME acquisition.

Vendor financing does not defer the seller's tax. According to the BOFiP, where vendor financing is granted, the entire capital gain is taxable in the year of sale, even if the price is collected over several years. The seller must therefore keep enough cash from the upfront portion to pay the tax.

Bpifrance's Garantie Transmission covers part of the bank loan, up to 50% of the amount borrowed, or 70% where the Region also takes part, according to the product sheet. It targets in particular the transfer of the majority of the capital or voting rights and, under conditions, the acquisition of a minority stake by the majority shareholder(s) where the transaction is essential to the company's development. Whether a partner exit is eligible should be confirmed with the bank, and the process is described in our article on obtaining a Bpifrance guarantee on a bank loan.

Take an illustrative example, not a real case: an SAS owned 50/50, where the departing partner sells their half for €400,000, having acquired it for €5,000. We assume corporate tax at 25% (the 15% reduced rate up to €42,500 is ignored for readability) and disregard interest, legal fees and the progressive scale.

On the seller's side, the €395,000 capital gain bears the 31.4% flat tax, i.e. €124,030, whichever of the first three structures is chosen.

In this example, the gap between the personal purchase and the two "corporate" structures reaches about €240,000 of pre-tax profit. It is explained by the flat tax the remaining partner bears to take the money out of the company.

Our view. At the firm, we look first at available cash and reserves. If the company can buy back the shares without weakening itself, a buyback followed by a capital reduction is often the most direct route. If the price exceeds what the company can pay in cash, the acquisition holding company, with vendor financing to close the funding gap, takes over. A personal purchase remains relevant for small amounts.

The choice of structure depends on three parameters: the company's cash position, the price relative to annual profits, and the payment timetable the seller accepts.

• Price validated by a documented valuation method, ideally an independent business valuation report
• Cash and equity simulated after the payment
• Articles of association and shareholders' agreement reviewed: approval, pre-emption, exit clause
• Tax cost of the three structures compared on the same price assumption
• Debt repayment plan tested against a weaker financial year
• Legal timetable: general meeting, creditors' objection period, formalities
• Seller's tax provisioned, especially with vendor financing

• For an individual seller, a company buyback has been taxed as a capital gain since 1 January 2015, at the 31.4% flat tax in 2026.
• The difference between structures lies on the buyer's side: moving money to an individual adds the flat tax to the repayment.
• A company buyback requires a capital reduction, equality between partners and sufficient cash.
• The acquisition holding relies on the parent-subsidiary regime (5% share) and, at 95% ownership, on tax consolidation.
• Vendor financing does not defer the seller's tax, which is due on the whole gain in the year of sale.