Feb 10 2016

Resolving Business Disputes Between Shareholders

By: A. Starkey DeSoto

Dollarphotoclub_66181043Just like marriage, business partners enter into their relationship full of excitement and hope for the future. Starting, maintaining, and growing a business requires commitment and a lot of hard work and, as the business grows, changes, or struggles, ultimate success of the business often requires the partners to work together, and compromise on various issues relating to the business.  Unfortunately, many business partner relationships end up irretrievably broken, and the business partners find themselves in a situation where they must end their business relationship, but where there are business assets that must be accounted for and properly distributed.

Under Florida law, whether the business is a corporation, limited liability company, joint venture, or partnership, there are numerous ways to end a business relationship.  If the business is successful, but the business partners are not able to continue their business relationship any longer, the best option may be for one or more of the partner(s) to buy out the interest held by the other partner, and continue operation of the successful business.  It also may be a good option for one or more of the partner(s) to purchase enough of the interest held by the other partner to obtain controlling interest.  This option would permit the successful operation of the business, but would not require the “other” partner to completely forfeit or sell his rights to all future profits of the successful business.

Another option is dissolution of the business.  Under this option, the business entity would be dissolved, and the assets of the business would be distributed to each partner in accordance with his or its interest in the business (or in the particular asset).  Each business partner would share in the profits (or losses) of the company, and the business would cease to exist.  While this option could be utilized for a successful or unsuccessful business, it often makes most sense to dissolve an unsuccessful business.

A third option is sale of the business.  Quite simply, the business partners could sell the business, and all of its assets, to someone else, and split the profits or losses in accordance with their interest.

Finally, as a fourth option, the business partners may partition the business, where the assets of the business would be sold or distributed as necessary to ensure that each business received its proportionate interest of the assets.

The proper, or best, method of resolving irretrievable business disputes between partners that desire to end their business relationship is unique to each business, as many factors would require consideration, such as the type of business relationship, the purpose of the business, the success (or failure) of the business, and the assets owned by the business, to name a few.  Regardless of which method is chosen to terminate the business relationship, it is important to ensure that the sale, dissolution, stock-purchase, or partition of the business, and accounting of all business assets, is properly done under Florida law.

If you are a partner in a business relationship, for a business in any of Broward, Miami-Dade, or Palm Beach counties, that is irretrievably broken, and you need advice on the best method of legally ending the business relationship, please contact a Broward business lawyer for a consultation, or fill out the contact information on this page.

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