Should one or more members "buyout" a withdrawing member?
Club members and treasurers often ask ......

Should one or more remaining club members "buyout" a withdrawing member?

First, before I answer that question, let's define a "buyout".    A "buyout" is where one or more people buy the units of a withdrawing member directly from that withdrawing member.    In such a situation the money and units transfer directly between these parties and not the club.
The simple answer is NO!   While technically it may be possible for one to sell their share of the club directly to another, doing so creates an accounting nightmare for the club.
What is often called a buyout is not a buyout at all.     In most cases, a member is withdrawing from the club and one or more remaining members want to make increased payments to the club.   The withdrawal is paid by the club, LIQUIDATING the units of the withdrawing member, and the extra payments are made to the club by the remaining members, whereby the club issues NEW units to those members.    Nothing transfers directly between members.   If those two transactions happen by coincidence to be recorded with the same valuation date, the newly issued units will have the same price as those liquidated by the withdrawing member.
That was the simple answer.   The issue gets more complex because many clubs charge withdrawing members a withdrawal fee.   This fee is often designed to reimburse the club for the eventual costs of liquidating its portfolio.   If so, the club may feel that these members, who made extra payments, prevented the club from realizing any current liquidation expenses.   Therefore, the club wants to pass on a credit for the withdrawal fee charged of the withdrawing member to those members making the extra payments.
I think it is helpful to demonstrate such a transaction by using a simple example.  

Let's assume Member X is withdrawing.  His account is valued at $1000.   The club charges a 3% withdrawal fee so the resultant payout will be $1000 less
3% which results in a net payout of $970.   Enter this withdrawal as you would any other withdrawal.

Now , let's assume that two remaining members, Member A and B, desire to make additional payments to the club so the club doesn't have to reduce its
stock holdings to pay off the withdrawal.     Provided that the club's partnership agreement allows for such extra payments and the allocation of a credit for the withdrawal fee to members making additional payments , each member could simply make an extra payment equal to 1/2 of the net withdrawal payout.   In other words, each member would make an additional payment of $485.    BUT WAIT, don't enter the payment that way!

Here is the trick, if you want to call it a trick....    Enter a PAYMENT from each of these members of $500.   Then enter a NEGATIVE FEE from each of those two members of $15.   Notice that after you enter the positive $500 payment and the negative $15 fee the net result matches the $485 actually received from each member.   The effect is that Member A and Member B each contributed an additional $485 but each received $500 worth of units, thus they each received a 3% discount.

If the withdrawal, extra payments, and fees are all entered into bivio using the same Valuation Date, the club will have exactly the same number of units outstanding after the withdrawal as it did before the withdrawal, the members making the extra payments will receive a discount for their additional payments, and the club will have the same total value immediately after the transactions as it did immediately before the transactions.  Also, no units or money transferred directly between members so no "buyout" took place.
Jerry Dressel
St.Louis, Missouri