Some business partnerships are so successful that they become lifelong working relationships. Other times, issues may arise that make it difficult for business partners to continue running a business jointly.
For example, one partner might breach the partnership agreement by failing to invest a set amount of capital or perform specific company tasks. Other times, they might engage in self-dealing or embezzlement. They might simply prove incompetent or too lazy to manage the challenges of running a successful company.
In those challenging situations, one partner may need to initiate a business breakup.
A business breakup is essentially a buyout
A partnership buyout can be a complicated process. The partners need to work together to estimate the company’s fair market value. They need to negotiate terms for the transition from joint ownership to sole ownership.
They must do all of this while emotions run high due to the proposed buyout. The partner seeking ownership may feel anger or resentment. The partner responding may feel frustrated, guilty or betrayed. Any of those intense emotions can lead to irrational behavior and unnecessary conflict.
Eventually, the partners set terms that may include a transfer of capital, a severance package, restrictive covenants and even transition support. Once the entire process is complete, the partner who proposed the buyout becomes the sole owner of the organization.
Business partners often need help evaluating documentation about the company, reviewing their contract and analyzing any buy-sell agreement they previously signed. Working with an attorney throughout the entirety of a business breakup can make it easier for one partner to assume sole control of a company, especially if litigation is necessary.