When Do Partners Need to Use Litigation During a “Business Divorce”?

 Posted on October 19, 2021 in Business Law

In many cases, business partners are able to work together for the benefit of themselves and their company. However, there are a variety of situations where partnership disputes may arise, and in some cases, partners may be unable to resolve these matters and continue working with each other. Disputes that cannot be resolved may lead to a “business divorce” in which partners decide to stop working together. While some partners may be able to reach an agreement on how to dissolve their partnership, others may need to pursue business litigation to protect their rights and interests.

Options in a Business Divorce

The procedures followed during a business divorce will depend on a variety of factors. These may include whether this type of situation was addressed in a partnership agreement, whether one or more partners wish to continue operating the business after a partner leaves the company, and whether a partner believes that one or more other partners have acted improperly or violated the law. Partners will also need to address issues such as liability for business debts and taxes and the methods used to calculate the value of business assets.

When planning a business divorce, partners will need to review their partnership agreement to determine how it will apply as they end their partnership. In many cases, a partnership agreement will include a buy-sell agreement that details how a business’s remaining partners will buy out the shares of a partner who plans to leave the business. A partnership agreement may also address the procedures that will be followed if the partners decide to dissolve the business entirely. In these cases, business assets may need to be liquidated and debts to creditors may need to be repaid before the remaining assets can be distributed among the partners.

While partners will often look to negotiate agreements that will allow them to complete a business divorce in a way that protects the interests of all parties involved, there are some situations where litigation may be necessary to resolve disputes. Multiple partners may wish to maintain ownership of certain assets and continue conducting business operations, or one partner may believe that they are not receiving an equitable share of business assets. Litigation may also address claims that a partner has committed fraud, violated the partnership agreement, or breached their fiduciary duty toward the other partners.

Contact Our Oakland Park Business Divorce Attorneys

Ending a business partnership can be complicated, and partners will need to ensure that they are following the proper procedures and meeting all of their legal requirements while also taking steps to protect their rights and financial interests. At The Elliot Legal Group, P.A., our attorneys can help partners address their legal issues and resolve their disputes during a business divorce, and we can provide representation in courtroom litigation when necessary. To arrange a consultation and get legal help with your case, contact our Wilton Manors business litigation lawyers at 754-332-2101.

Sources:

https://www.business.com/articles/how-to-dissolve-partnership-agreement/

https://www.americanbar.org/groups/business_law/publications/blt/2016/10/04_heyman/