The urge to split isn’t what typically causes an expensive dispute and litigation – instead, the dispute arises in relation to HOW the split is going to take place (who should walk away, who gets paid, how much does he or she get paid?).
If these partners had created a “buy/sell agreement” either at the creation of the business, or at some later point while still on good terms, there probably wouldn’t even be a dispute. They would simply look at their agreement, calculate who gets paid and how, and move on with their lives.
Business partners part ways for all kinds of reasons, both good or bad, or right or wrong. Examples include:
With a buy/sell agreement in place, the owners have already agreed upon what’s going to happen if a split occurs. The owners can agree to very specific details as well, including limiting the sale of the ownership to certain parties, or granting a right of first refusal to the remaining owner/s.
It can even specify how the buyout will be paid for, whether through existing cash on hand, future proceeds, or potentially even from the proceeds of a life insurance policy where there’s a death of a partner.
As mentioned above, these agreements can be entered into at the inception of the business, or at some later time if the parties are willing to agree. And just as most other terms in the partners’ operating agreement, they can be modified or amended as well.
Whether looking to form an LLC, corporation or other entity, Goosmann Law Firm can work with business owners to make sure that they have proper agreements in place, and that those agreements accurately reflect the nature of their relationships.