NAVIGATING BUSINESS PARTNERSHIP DISPUTES
Do you need help navigating a strained partnership in your business? Or are you worried that your business partner may try to remove you from the company?
In this article, we will dive deep into the most frequently asked questions by business partners experiencing disputes and provide you with helpful answers.
Can My Business Partner Push Me Out?
In most situations, you cannot be ousted as a business partner without your consent. However, depending on applicable laws and agreements, your partner(s) may attempt to persuade you to leave or try to buy your way out of the company.
Your business partner can only remove you from the company if they prove you are violating the law and partnership terms in a partnership agreement.
Compared to a corporation, it may be harder for your business partner to push you out if the company is established as an LLC.
How Can I Force My Partner Out of the Business?
Breaking up can be challenging, especially in the business world. What can be done if you have a partner who refuses to leave your venture? The answer lies within state law and internal governing documents; often, removal of a stubborn partner only becomes an option when:
- The operating or partnership agreement says you can under specific circumstances,
- The business partner is engaging in illegal activity concerning the business,
- The majority interest holders in the company vote to remove the partner, or
- The partners dissolve the business.
The business structure (such as an LLC, corporation, or partnership) also directly impacts your ability to remove a partner from the company.
For instance, Arizona has extremely limited circumstances where an LLC member can be involuntarily dispelled from their role.
As a business owner, having an attorney who will look out for your best interest is imperative. While having internal corporate counsel can be beneficial, they are generally only offering advice on behalf of the company as a whole and not giving advice to individual partners in the company. For personalized legal advice tailored specifically to you and your objectives, consult an informed business lawyer who truly understands what you need or want.
Our expertise in business law is unparalleled, and we understand that businesses do not want to dissolve. However, if a division of assets or resolving legal issues is necessary, our clients continuously commend us for our “persistent” and “aggressive” representation.
Can I Force My Business Partner to Buy Me Out?
If you’re operating or partnership agreement contains a buyout provision, you may be able to compel your business partner to buy out your interest. An enforceable buy-sell agreement must be in place to do so effectively. The buyout terms either need to exist within the original agreement or could be contained in a separate agreement.
One way for a buyout to occur is where you explain your reasons for wanting to leave the company and your partner(s) consent to purchase your interest. In other scenarios, it will be necessary for you to show proof of a qualifying or activating event (for example, incapacitation) under the buyout agreement, and that you meet all the requirements necessitating a buyout pursuant to the agreement.
If your business partner refuses to purchase your interest in the company, you can take legal action. Before taking any action on moving towards selling your interest in a company, you need to consult with a business lawyer for advice and guidance before moving forward with any decision. An experienced attorney will help to solve conflicts quickly; however, other scenarios necessitate enforcing litigation. Every situation is unique, so there is no guarantee that the same results will be replicated even if you are going through similar circumstances.
Can One Partner Dissolve an LLC?
Dissolving an LLC without all of the partners’ consent is typically not possible. To successfully shut down an LLC, a partner would need to seek court approval by filing a lawsuit. Laws may differ from state to state, however, courts can possibly grant dissolution in cases that involve any of the following:
- The LLC would violate the terms of its operating agreement if it continued or
- The other partner has died or is incapacitated.
If one partner holds 50% or more of the total ownership interest in a business, they may be able to dissolve it unilaterally. However, if their stake is less than that, at least fifty percent of the partners must agree to dissolution; this depends on each company’s operating agreement and applicable state law.
Dissolving a business is a big decision, especially if you are trying to do so without the support of your business partner(s). Again, do not try this alone; consult a business attorney with experience to handle your case tactfully and effectively.
Can My Business Partner Force Me to Sell?
Should your business partner determine that you have violated the law or broken a contract related to the company, they could take legal action and force you to divest. This would involve dissolving any relationship between yourself and the company and selling all of your interest in the company. As such, both parties must ensure that their buyout agreement is clear and up to date, so everyone knows where they stand if things go wrong.
If a buyout agreement is in place, it will dictate the terms of sale for the interests in the company. This includes pricing and timelines associated with selling. If no such agreement exists, either a buy-sell arrangement must be established, or litigious action should be considered as an option moving forward.
These scenarios are not easy to interpret and require professional expertise to decide on the best course of action. If either you or your partner makes ill-advised decisions too swiftly, then this could lead to further complexities later down the line that nobody wants to deal with.
Savvy attorneys understand the importance of making strong and well-supported demands to deliver successful results.
Can a Business Partner Be Fired?
Depending on the legal jurisdiction and any existing agreements (such as an operating agreement), terminating a partner may vary depending on your definition of “firing”. If you are removing them from the business entirely, this process will differ than if you were merely firing them as an employee.
If you have an operating agreement, it may establish what conditions allow for the removal of a partner from your business. Furthermore, when enforcing this provision, it is essential to ensure that all requirements are met.
My Business Partner Is Threatening Me. What Should I Do?
If your business partner is making threats, it is essential to consult a reputable business lawyer for assistance. Do not let something serious spiral out of control – take proactive steps now! Failure to promptly address the issue or react quickly and appropriately may result in more severe problems down the line.
My Business Partner Locked Me Out. What Can I Do?
You should consult with a lawyer immediately if you are ever locked out of your business. A business attorney can help you decide the best course of action by analyzing the partnership agreement and figuring out the quickest and most efficient way for resolving the dispute. Hopefully the dispute can be resolved without litigation, but you need a good business attorney to be prepared and ready for litigation if needed.
Speak With Attorney Stephen J. Anthony today About Your Situation
We leverage our decades of Big Law Firm experience at Anthony Law Group to provide top-notch representation with one-on-one personal attention. You are never just a face in the crowd or a dollar sign at our firm.
We do not exclusively represent either plaintiffs or defendants, making us an agile and adept advocate in the courtroom. We continually strive to find the best and most cost-effective solution to any business dispute that we handle.
If you require sound legal counsel as a business owner residing in Arizona, the Anthony Law Group is here to help. We have extensive experience standing up for our clients and assisting them when disputes with their partners occur and strive to ensure that you reach your desired outcome at all costs.
Contact us anytime to schedule a consultation.
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