If you’re like most people, you went into business to stay in business. But not all companies last forever, and not all business relationships withstand the test of time. Sometimes, business partners agree to part ways and do so amicably. Other times, one partner tries to push the other partner out of business, creating legal headaches and complications.
In this post, the team at Mallery s.c. explores some business partnership basics and answers your questions about business partnership breakups. You may wonder, What should I do if my business partner is trying to push me out? We can help you answer that tough question.
We strive to provide the most updated information. But every situation is different, and we discuss generalities in this post. For targeted advice, contact our team of talented and award-winning business attorneys.
Business Partnership Basics
Before discussing business breakups, let’s review some basics about how partnerships work.
Business partnerships are governed by their internal governance documents and by applicable law. For example, operating agreements govern the affairs of limited liability companies (LLCs), as does Wisconsin’s Uniform Limited Liability Company Law. Corporations are laid out by bylaws and Wisconsin’s Business Corporations Law. Likewise, most partnerships are governed by the Uniform Partnership Law and the partnership agreement.
In addition, parties are free to enter into valid contracts that further define their business relationship. A common contract that parties enter into is a “buy-sell agreement.” A buy-sell agreement may be a standalone contract that the parties sign between themselves. Or it might be part of the internal governance documents, like the operating agreement.
A well-written buy-sell agreement elaborates on when and how business partners can leave the business. For example, the contract may provide for triggering events (like death, divorce, or incapacitation). It also answers important questions, like how to value someone’s partnership interest and who can buy the partner out.
As you can see, determining how to respond to a partner’s effort to push you out depends largely on the governing documents of your business. This is where an experienced business lawyer can help you.
My Business Partner Is Trying to Push Me Out. What Can I Do?
Now that we have the basics, we’re ready to talk about what to do if your business partner is trying to push you out.
Can My Business Partner Push Me Out?
Can your business partner legally push you out of the company? It depends on the circumstances, agreements in place, and applicable laws. Even if you and your partner signed a buy-sell agreement, your partner needs to prove that a triggering event occurred for them to buy out your shares.
Further, some steps need to be followed in a particular order for a partner to remove you from the partnership under a buy-sell agreement. For example, the parties need to agree on a proper valuation of your shares in the company. Then, everyone must negotiate and agree on when and how the sale will occur.
What Are My Options When My Partner Is Forcing Me Out of Business?
If your partner is forcing you out of business, it’s essential that you don’t try to get back at them. Instead, gather the relevant information and talk to an attorney.
Occasionally, these disputes can be based on misunderstandings. In that case, clearing the air can help smooth things over to a point where everyone can agree to keep working with each other. But that’s not always the case. Further, these disputes can take a quick turn for the worse if not handled properly at the beginning.
If My Business Partner Is Trying to Force Me Out, Should I Talk to an Attorney?
Talking to an attorney early on is critical to helping smooth the trajectory of the dispute. As we discussed, sometimes what’s leading a partner to try to force out the other partner is rooted in a misunderstanding. A legal professional listens to both sides, gathers information, and proposes a solution that works for everyone.
A business attorney can help identify and protect your legal rights, representing your interests at all times. They can help you understand your legal options and advise you of the proper course of action. If necessary, they can file or defend against a lawsuit on your behalf.
Mallery s.c.—Distinguished and Compassionate Business Attorneys Serving Wisconsin
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If your business partner is trying to force you out of business, don’t hesitate to call our trusted advisors today or contact us online.