As a dedicated Media Business Attorney, clients come to me all the time with questions about separating from your business partner with a shareholder’s agreement. If you and your partner wish to voluntarily break up and there is an agreement. Then what you want to do is go to the agreements that have been formed when you either started the corporation, the company, the partnership, or the limited liability company and see what you and your partner have agreed to during the course of the operation. These agreements could be your formation agreement, which is your corporate bylaws; it could be the corporate minutes that reflect certain agreements, and shareholder’s agreements between you and your partner during the course of that relationship, also it could be a particular buyout, which is probably the most important of the documents we want to look at. It could be other types of employment agreements; it could be confidentiality agreements or it could also be restrictive covenants that deal with certain situations when you leave.
If it is a voluntary breakup then the procedure that you would use, and it’s always best to get some guidance either from your accountant or your financial advisor, somebody that may know the value of your company. You may have a fingernail on it as to what you think it’s worth. The accountant may have the same number, but your partner and his accountant may have a different number, you want to arrive at that valuation process. The way you can do that is if you disagree between yourselves as to what the value is, then you can secure third parties. They are in the manner of a formal appraisal, which is a little bit expensive, but it’s a process that arrives at a business number. There are some certain experts who do this as a living and arrive at a number.
It could be that you and your partner have agreed to it previously in one of your separation agreements or your buy/sell agreements that says if we break up, this is what we determine the value of the company to be. That could have been done on a yearly basis or it could be done every two years. It’s up to you as to how much preparation you have put into this event coming up. If your agreements provide for it, then you move forward with the voluntary breakup and the dissolution where each partner goes his own way then you arrive at the number. You pay off the liabilities and either somebody accepts the particular assets or equipment or they’re sold and put into the pot and at the end after all liabilities are paid, you have a certain amount and that pot is divided by your percentage ownership of it.
If you have any questions regarding separating from your business partner with a shareholder’s agreement, please contact our Media Business Attorneys for a free case evaluation.
This educational blog was brought to you by experienced Business Lawyer Walter J. Timby. Our law firm proudly represents clients throughout Media, as well as Pennsylvania, the greater Philadelphia area, Delaware and New Jersey.