Business partnerships can be like marriages. You start with the best of intentions, but sometimes things don’t work out, and a “business divorce” becomes necessary. Whether it’s a married couple that started a business during their marriage or a business partnership that’s breaking up, the process can be complicated and contentious. In this blog, we’ll discuss some key points to consider in a business divorce, based on an interview with a legal expert.
Dissolution of Partnership.
If a business partnership is breaking up, then the ownership needs to be transferred or there needs to be a buyout of sorts. The remaining partner or partners can take over ownership, or there can be a buyout for their ownership value or values. The value of each partner’s percentage of the partnership needs to be determined, which may require a business valuation.
Negotiating the Business Divorce
To negotiate a business divorce, it’s essential to consult with a business attorney. A business attorney can help you determine the value of your percentage of the partnership and advise you on the best way to proceed. Typically, the negotiation process takes at least six months, so it’s important to start the process early.
If a married couple starts a business during their marriage, the business is considered community property. That means that in a divorce, the business needs to be divided, and ownership needs to be awarded. The process can be complicated, and working with a business attorney will help to ensure that your rights are protected.
Whether the divorce is a traditional divorce or a business divorce, it can be settled by agreement or in court. In a traditional divorce, the settlement agreement is approved in court. In a business divorce, if the partners have a binding agreement on what should happen that agreement should be followed. If not, mediation is often the first step, followed by arbitration if necessary. If all else fails, the case can go to court, and a Judge will decide.
Importance of Formation Documents
Just as it’s essential to have a prenuptial agreement in a marriage, it’s essential to have dissolution documents in place when forming a business. These documents outline the process that will be followed if the business needs to be dissolved, which can help prevent disputes and make the process smoother.
In conclusion, a business divorce can be just as complicated and contentious as a traditional divorce. It’s essential to consult with a business attorney early in the process to ensure that your rights are protected and that you have a clear understanding of the process. With careful planning and the right legal guidance, you can navigate a business divorce successfully and move on to the next chapter in your life.
Consult with an Experienced Business and Family Law Attorney
At Martinez Legal, we are experienced Family Law and Business Attorneys. We can assist in a traditional divorce involving a family business or business partnership divorce. Contact us today at 940-320-2922 to learn more about how we can help.