You're negotiating the sale of your 50% interest in your corporation to the holder of the other 50% interest. Don't forget about the liability you might have under any personal guaranties!

A personal guaranty is usually required in obtaining a bank loan or line of credit. Landlords will also typically ask for a personal guaranty of a lease. However, other creditors will try to lure business owners into signing personal guaranties. Business owners should beware of the "boilerplate" fine print in documents such as vendor credit applications (including credit card applications), as these documents often contain language under which the signer is agreeing to personally guaranty the obligations of the company.

Once a personal guaranty is given it is very difficult to negotiate a termination of that guaranty without paying off the underlying guaranteed obligation, since the creditor really has no incentive to let the guarantor "off the hook". In the context of a sale of an interest in the business, generally the selling party relies on an indemnity from the purchasing party to hold the selling party harmless from any liability on the guaranty. Of course, an indemnity is only as good as the person giving it.

The sale transaction itself might be (and probably will be) an event of default of the underlying guaranteed obligation. For example, a loan agreement or lease would typically provide that a change in ownership of the borrower or tenant would constitute an event of default. In those situations, the other party to the contract will need to be contacted about the sale.

Some guaranties are considered "continuing guaranties", in that they are meant to include the guaranty of future obligations of a debtor to the creditor—for example, future borrowings under a bank line of credit. A guarantor is allowed at any time to revoke a continuing guaranty, and is then only responsible for the amount outstanding at the time of revocation. However, revocation of a continuing guaranty will typically be an event of default of the underlying secured obligation.