Partnership disputes can occur for a number of reasons, ranging from fundamental conflicts about the course of a company to violations of pre-existing agreements. Even partners who start their business on the best of terms may run into issues that threaten both their company and their relationships’ longevity.
When they do, the details of the situation—such as the business’s structure, existing agreements, and whether the dispute is the result of a legal infraction—will decide whether one party can force the other out. If you are involved in such a situation, contact Sattiraju & Tharney, LLP law firm.
Can your partner push you out of the business?
You might have an operating agreement or partnership agreement in place, regardless of the type of business you run—limited partnerships, limited liability corporations (LLCs), or something else completely. These agreements are usually drafted at the time the business entity is established. Written business agreements often have clauses that specify how disputes between partners will be settled.
In cases where one partner sells their ownership stake in the company, this might require a buyout agreement. The following are some everyday situations that lead to a buyout agreement:
- A partner’s passing
- Partner retirement or termination
- Personal bankruptcy or divorce
- Disability
Furthermore, some buyout agreements may have a push-pull function that either partner may choose to trigger.
Does a buyout agreement still exist?
If your operating agreement or partnership contains a buyout agreement, sometimes referred to as a buy-sell contract, the terms of that arrangement will limit the business partner’s power to force you out. Analyze the conditions that lead to a buyout. It will be difficult for your spouse to get rid of you if you have not activated the buyout clause or broken any other laws or the agreement.
You must comply with the conditions of the buy-sell provision if a trigger event (as the provision defines that word) has taken place. Your partner may ask the courts to get an order compelling you to comply with the terms of the agreement if you do not.
Eliminating a Partner Without a Partnership Agreement
The rules and remedies for winding up a partnership will be governed by state law if there is no explicit partnership agreement or similar contractual provision. It can include:
- A choice made willingly by both partners
- A violation of federal or state legislation
- A breach of the partnership contract
- A breach of a partnership agreement that results in harm
- In personal bankruptcy, a partner becomes a debtor.
Working with legal counsel is the best method to evaluate dispute resolution decisions and negotiate a beneficial separation since pushouts or the end of a partnership involve danger. Expert legal counsel will be necessary for examining any potential litigation and requesting dissolution or purchase from the court when an out-of-court deal cannot be reached.
How Can I Avoid Being Forced Out by My Partner?
Both proactive and reactive actions are required to protect your interests and rights in a business you co-own with a business partner.
This involves creating governing papers and partnership agreements that are clear and enforceable and that define how disputes will be settled both before and after they occur.
These agreements, when correctly created, provide specific instructions on operational matters like:
- The duty and authority of partners
- Profit and loss sharing
- Ownership of intellectual property and commercial secrets
- The procedures for settling disputes between partners
- The requirements for asset distribution, member replacement, and ownership transfer in the case of dissolution
- The business valuation method
The facts at hand will decide your alternatives and plan of action if an argument has already made you aware of a potential pushout.
Contact your lawyer
Your attorney has a lot of experience advising executives, stockholders, and business partners on a variety of company legal problems. Your lawyer has the tools to help you examine your options and choose the best course of action, from creating crucial contracts and agreements to assisting in the negotiation or litigation of partnership issues.
