This topic comes up more often than one would think in the business law realm of practice. It is so often the case that a potential new client comes into the office devastated because their business partner is just not working and they want out. So, what do they do?
The answer to that question is fairly complicated, but certain things can be done early on in a business to avoid potential headaches and problems in the future. Many people seeking to dissolve their business come in not having set up any formal documents related to the business from the get-go of the company. I cannot re-urge enough how important it is to discuss and draft a formal operating agreement that deals with all issues related to the running of the company and that includes what happens if the members of the company want to get out of the company. This step is so simple but can save so much time, frustration, and headaches in the end if you want to remove yourself from the business.
A good business lawyer can be very helpful in aiding you and your new business in drafting this agreement. An attorney knows exactly what needs to be included and can help guide you in knowing what you should be thinking about with the company. For example, many people who are in business with only one other person do not discuss or make a decision on what happens when decisions result in a tie. It is so much easier to decide what to do when you and your business partner can’t agree when the relationship is on a high and not at its most acrimonious.
Even if you are not parting ways on poor terms, events in life happen and you may need to get out of the business for a myriad of reasons. Still, problems can arise when your business partner envisions running a business on their own and being the only one placed in a financial risk situation. Having a clearly outlined method of getting out of the business is the best possible scenario. Sitting down at the very beginning of a business and having a somewhat uncomfortable discussion with your business partner(s) is one of the most valuable things you can do for your business. Further, this discussion really protects you in the long run.
There are several things that you need to be considering in an exit strategy that is found in the company’s operating agreement. You need to consider how you will be valuing the business as the time you plan on exiting, when that valuation date is set, what notice terms need to be given to the other partners in order to trigger your right to exit the business, how the appraisal will be conducted and how you will be paid out for your portion of the business. There are several other things to consider in this situation but these are just a few things that are incredibly important for any new business owner to consider up front, prior to starting a business.
A business divorce can be messy just like a regular divorce between a husband wife. However, it can be alleviated if certain steps are taken early on in the business relationship. If you are contemplating starting a business, even a solo business where you don’t have a partner, contact a divorce attorney Arlington, TX trusts immediately and get the proper protections put in place for you and your business.
Thank you to our friends and contributors at Brandy Austin Law Firm for their insight into family law and divorcing a business partner.