For years, your relationship with your business partners proceeded smoothly. Or, perhaps you started to experience problems with your partners or co-owners since the founding of the company. Regardless of when problems developed, they became so serious that the company, business, or practice became unmanageable. For instance, consider several partners who went into the restaurant business. While the dining establishment was highly successful, one partner complains that the other three partners act in concert and refuse to allow him any say in the business. Even worse, the partner complains that while the other partners seem to be using the business as their own personal slush fund, he hasn’t seen a dime.
While the foregoing is a somewhat extreme example of a partnership that has devolved into chaos, with issues including freezing out one partner and potential fraud concerns, these situations do occur. When a business relationship has soured and it becomes necessary for partners to go their own separate ways, it is essential that your hard work, efforts, and capital contributions are accounted for and appropriately compensated. Attorney William Heyman at the Heyman Law Office has more than 20 years of experience handling these issues. To schedule a confidential consultation with Mr. Heyman or another lawyer on our legal team, call the firm at (410) 305-9287 or online today.
Steps to Dissolving a Bad Business Partnership
Like most business transactions, the formation of a business partnership is set forth in and undergirded by a contract. In this case, the contract is in the form of a partnership agreement. The partnership agreement should ideally set forth the process and procedures by which disputes in the organization are settled and the handling for an array of concerns. If your business is not a partnership but you have entered into an LLC, then the operating agreement would play a similar role. If the organization is a corporation, the shareholder agreement and other governing documents are relevant.
Once the governing documents have been obtained, it is often prudent to conduct a valuation of the business and its assets. This is a complex and laborious undertaking for even small to midsized entities. However, it is a necessary step when determining how to proceed with a buy-out. If possible, it is also wise to agree on an appraiser or valuation expert from the outset. This can avoid negotiations to reconcile potentially disparate valuations.
After assessing the above, a partner should continue to work with a business and litigation lawyer who can set forth the options that are likely to achieve the partner’s goals. Relevant considerations at this step include consulting state and federal law. The practical mechanics of the deal should also be considered. These questions include:
- Will this transaction be conducted on the basis of debt or equity?
- Are there provisions in the partnership agreement that set or modify the price? Are you a majority or minority partner?
- Does the operating agreement provide for a forced sale?
- Are there debts or encumbrances on the business that would reduce the value of the business or constrain how it must be operated?
Once these and other considerations are accounted for and a forced buyout plan has been developed, the transaction must be executed. A business transaction attorney can guide the entire process.
Alternative to Business Buyouts
In some situations, it may not make sense for a forced business buyout to proceed. Therefore, a comprehensive assessment of all business transaction options should be considered prior to taking any action. One option is to dissolve the partnership in its entirety. Alternatively, you may consider changing the weighting of the partnership arrangement to provide more or less control over the business. If your partner will not walk away from the business, selling your stake and utilizing the equity to form a new entity may also be viable. Mr. Heyman can assess these and other options before providing a recommendation.
Forced Business Buyout Attorney Serving Businesses in Maryland and Nationwide
The Heyman Law Office provides strategic insight and guidance into partnership buyouts and commercial transactions. Mr. Heyman has over 20 years of experience assessing and analyzing issues of this type for small, mid-size, and large partnerships, limited liability companies and other forms of businesses. To schedule a private initial consultation with Mr. Heyman, please call (410) 305-9287 or contact him online.