Many businesses are formed as, or become, organizations with multiple partners. It begins as an exercise in teamwork. Everybody wants the company to succeed and will do whatever it takes to make it happen.
However, as time passes and the business progresses, the partners face various challenges. If the partners cannot find a way to be in agreement about how to resolve those challenges, there may come a point at which the partners decide to part ways. The disagreement may center around how the business should be managed, distributions, or unresolved personality conflicts. When the disagreement ends in a stalemate, the solution may be to divide the business.
If there is a majority owner of the business, that individual can decide to continue running the business, but when the division is equal and nobody agrees about what should be done, or when one of the partners wants to be bought out, it’s time to bring in a business lawyer.
Petition the Court
As an equal business partner, you need a the services of a lawyer so you can petition the court. Essentially this means asking the court for a restraining order or injunction that prevents any business assets from being used for anything other than daily business operations. In other words, it prevents a partner with access to the property from taking assets and disappearing, leaving the business and remaining partners to pick up the pieces while their hands are tied.
For this reason it’s important for business owners to act promptly once it has been determined the dispute will not be resolved by the partners.
Examine Governing Documents
The first thing a Lovelace Law business attorney will do on your behalf is look over the business’ governing documents to see if, during the formation of the business, the partners mapped out a plan about how to settle disputes or dissolve the business. Such a plan may appear in the formation documents under the heading of “Company Agreement.”
In the event such a document exists, your lawyer will help you ensure it’s executed properly.
Without any such governing document you’re back to the stalemate and will need your Lovelace lawyer to help you figure out how to force the other partner’s hand for a buyout.
Leverage a Buyout
There are two ways to have an attorney help you leverage a buyout. The first is to ask the court to appoint a receiver. In this scenario, as an unbiased third party, the receiver’s role is to liquidate the business so the money can be divided evenly among the partners.
The second option is to ask a judge to order that the business cease its operations. Once operations have ceased, partners may be more willing to sell their part of the business, thus ending the stalemate.
Once a lawsuit has been filed, and if all vested parties are willing, mediation is an option partners may choose in order to stay out of court. Even then, partners will want legal representation to examine the corporate activity and make sure everything is done legally.