Business Divorce
Navigating the challenge of business partner disputes
One major factor that causes many businesses to fail, whether within a few years or as late as subsequent generations, is business divorce. Major disagreements are nearly inevitable for a variety of reasons. It is not usually not a question of whether business owners will separate, just a question of when business owners go in different directions.
Imagine you are the co-owner of a successful business that is incorporated or formed in Delaware. You and your co-owner(s) disagree on a critical business matter, and you cannot resolve your differences. Should this be a 50/50 business ownership, deadlock may result.
A business divorce refers to the separation of a business when its owners cannot continue running the business together. Often times, this business partner was once your best friend, family member, or even spouse. Other times, the business was a marriage of convenience where people have complementary skills and resources. This business was likely your baby, and you worked hard to create it. Often, one of the owners has reached a high level of frustration and communications have broken down along with trust. This business may have been a large part of your identity. It may be time to or difficult to leave this behind.
The Williams Law Firm is here to assist business owners who are entering into this challenging process to navigate it effectively and reach a favorable outcome. While avoiding litigation is usually desirable, sometimes it is necessary to achieve your objective.
Delaware law governs the internal affairs of companies incorporated in Delaware, and therefore, you need an experienced Delaware business lawyer to assist. Usually, our review of your governing documents is the starting point of the analysis in evaluating facts to determine realistic objective and outcomes.
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A business divorce is when two or more business partners decide to end their business relationship. These tend to be most common in the two-owner 50/50 relationship. That is because either party may have the power to deadlock the business, but usually the question comes down to whether the business will continue.
If the business is to continue, then the question becomes: which partner will run it and under what terms. Usually, the feuding co-owners disagree about which direction the business should go or one partner loses interest in the business.
A business dispute may even involve the death of one business owner, resulting in disagreement between the surviving business owner and the estate of a business owner, which is often represented by the deceased owner’s family member.
A business divorce is typically necessary in the case of limited partnerships, limited liability companies, and corporations wherein the business partners can no longer run the business well together. When the documents governing the internal affairs of the company do not provide clear guidance, then the parties need to have a meeting of the minds to determine how to proceed.
Each owner should be represented by a different lawyer. If no agreement is possible to allow the disgruntled business partner to leave the business, then the unhappy owner may petition the court for a dissolution or other recourse for past mismanagement.
If you are considering your legal options, take some time to consider what your goal is. Do you want to step away from the business completely? What buyout would you be satisfied with, and can this be paid over time? Would you want to remain in the business if your differences could be fixed? Avoiding lawsuits is generally desirable because lawsuits are expensive.
Finally, know that the process is usually more gray than black and white. The Williams Law Firm has experience working with business owners interested in mediating disputes or litigating them to conclusion. This can involve the founders, their children, or even grandchildren in the case of a family-run business. Consulting with an attorney early in the process can be helpful to give perspective on whether you will need to pursue litigation.
Knowing this ahead of time will prepare you for the ups and downs of the process ahead of you to get a favorable outcome.
Please contact The Williams Law Firm to explain your situation to see how we can help you.
“Injustice anywhere is a threat to justice everywhere.”
– Martin Luther King, Jr.
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