As a dedicated Media Business Lawyer, clients come to me all the time with questions about how to involuntary split from your business partner. If your breakup is not going to be voluntary and you do have an agreement, then what you have to do is resort to what the agreement says. Hopefully during the course of the life of the company, you and your partner have anticipated this particular option. It’s always best to have a plan in place because when you get to the divorce stage, if you have the agreement it’s a lot easier to follow. The agreement will provide for the termination. It will provide for a formula as to how we’re going to evaluate the company. Usually those formulas involve appraisals, agreements, to set determination by the accountant or a business advisor that puts a number on the company’s value and then an assessment as to how we’re going to actually pay it out.
If the one individual wants to remain in the company, then the buyout provision sets forth how we’re going to pay it, these are the amounts that we’re going to pay, and over time this is how we’re going to pay it. It can also be based upon a cash settlement, in other words, a dollar amount that will allow that exiting partner to go out at a certain time. The argument that you have with this partner is that, he may not want to go. However, he has previously agreed this is the way we’re going to do it and if I trigger it based upon what I think is a position where we can no longer go forward, then the other person buys it out.
The difficulty sometimes is, if you are the one who has made the offer to say I want to buy you out and establish a low price then it can get turned around on you and the exiting member. The member you want out, says okay I’ll buy it for that amount from you. The difficulty then becomes how we resolve this difference. It can end up in court, which is the least favorable option. It can end up in mediation, which is a very good way to voluntarily enter into a dispute on how we are going to resolve it. The in between position would be we end up in arbitration, which is we pick an arbitrator, lay out all the fact as to what we think the value is, apply the agreement, and then move forward with the arbitrator’s decision, which is usually held to be non-binding and usually set forth in the agreement.
If you have any questions about how to split from your business partner involuntary, please contact our Media Business Lawyers for a free case evaluation.
This educational blog was brought to you by experienced Business Attorney Walter J. Timby. Our law firm proudly represents clients throughout Media, as well as Pennsylvania, the greater Philadelphia area, Delaware and New Jersey.