Business partners splitting the company they own can be complicated and stressful. Separating business owners have a unique set of issues to consider such as the division of ownership, interest, assets, and debts of the company. With the right team on your side, you can mitigate these issues at the Monahan Law Firm by scheduling a consultation with our experienced business law attorney.
To learn how we can help call us now at (623) 300-2727.
What is a Business Divorce?
Business dissolution is defined as the settlement or legal action intended to end the business partnership between two or more associates or stop their mutually owned organization. Sometimes, business separations can grow increasingly emotional and upsetting. More often than not, they are also complicated.
A common factor leading to business divorces is arguments between partners. Because emotions and tensions can run high, it is important for your attorney to be aware of any interaction and communication between partners.
What Are the Warning Signs of a Business Partner Leaving?
Below are some signs your company may be facing a business divorce:
- Broken communication
- Different working styles not functioning together
- One partner not carrying their weight
- Differing business priorities and goals
- Increasing business disagreements
- Inappropriate use of business accounts
- Violations of partnership agreements
- Lack of respect from a partner
- Client contracts not being fulfilled
What to Do When You and a Business Partner Are Splitting
If you and your business partner are having a dispute, we recommend you take these steps:
1. Act as quickly as possible
Decide quickly on a break-up date, and ensure that it is followed. Once you have made the decision to end the partnership, it's better for both parties if it happens quickly. Set an agreed-upon date and commit to it.
2. Discuss plans for the future
Before you transition to a new business or partnership, it is important to communicate openly with your partner. This helps to minimize any potential legal issues as well as avoid personal complications. Additionally, try to be as transparent as possible in order to avoid any hurt feelings.
3. Discuss your plans with an attorney
Prior to ending your relationship, it's beneficial to consult a business divorce lawyer. They can assess your formal documents and any contracts between you and your partner, ensuring that no conflicting legal matters arise.
Having an attorney review your partnership documents, which may include an exit strategy, is important. If a non-compete agreement or agreements related to intellectual property were signed, these should also be reviewed.
Having help from third parties such as an attorney or CPA, when negotiating terms and coming up with a separation agreement is beneficial. They can accurately value your business and related assets as well as create a buffer between parties if any emotional matters arise.
4. Get a New Appraisal of the Company
Prior to a business being divided, it must be appraised. If the parties can consent on the worth of the business and its possessions, the courtroom will likely acquiesce their judgment. In case they cannot, the court itself will settle. There are several methods of working out the worth of the business:
- Determining a business's worth based on its income.
- Asset-based financing evaluates the resale value of both tangible items, like furniture and equipment, and intangible assets, like trademarks and goodwill.
- Industry formula — utilizing standard valuation approaches used in the industry.
- Comparable — based on the value of similar businesses.
5. Keep Personal and Company Assets Separate
Before agreeing to the split, it is advisable to document the balance on any business accounts and credit cards. Taking this step would help you protect yourself from sabotage or any poor decisions made by your partner. It is important to give back any company items, such as technology, data, intellectual property, or confidential information, in order to avoid being held legally responsible.
6. Call Monahan Law
If you and your partner decide to put your faith in a trusted attorney, you can both be comfortable with the decision to split assets or set a price if one of you is buying out the other. It's important to seek legal advice at this stage, too, so that all legal matters and taxes are taken care of.
Common Issues During a Business Divorce
When going through a business divorce, many issues can arise. By working with an experienced commercial litigation attorney in Phoenix, you can help avoid any of the following issues:
- A business split or dissolution
- Dividing existing clients between partners
- The division of physical and intellectual property, financial, and digital assets
- The future of the employees
- Settling any existing contracts
- Deciding on future ownership of a real estate
Ways to Reduce Risks in Business Separation
To limit dangers, it is crucial to stick to the following regulations:
- Establish an exit strategy
- Hire an attorney
- Document financial statements for the business
- Reduce company spending, and save receipts
- Address company debts
- Consider mediation for your issues
Evidence has shown that the state will not challenge a business separation when it is intended to access new markets, gain more customers or optimize existing resources. If legal action must be taken, then the arbitration court will likely side with the taxpayer, provided they can back up the goal of the separation and establish the autonomy of each business entity.
How We Can Help Protect Your Interests in the Business
At Monahan Law, our skilled attorneys will work closely with you to protect your interests and assets during a business separation. Reviewing all business partnership agreements and documents is essential when trying to protect your share of a business.
Reviewing intellectual property and business relationships can be one of the most impactful actions during a business split. Being as transparent as possible with your lawyer will help ensure the best possible outcome during the business divorce process.
Contact Monahan Law PLC today
If you are in need of a business divorce in Maricopa County, Arizona, contact an experienced business dispute attorney at Monahan Law PLC. Call (623) 300-2727 to schedule an initial consultation today.