Can I Force My Business Partner to Buy Me Out?
It is common for business partners to experience conflict, and in some cases, these disputes are serious. If you have decided that you are not able to reconcile with your business partner, it may be time for you to leave the company altogether. If you want to leave your business, but your other partner or partner refuses to offer to buy out your shares or interests in the company, you may be wondering about your options. Your legal partnership is essentially a single legal entity, and the situation can become complicated when one partner wants to sell his or her shares and the other partner refuses. Whether or not you can force your business partner to buy you out largely depends on your written agreement.
It Depends on Your Business’s Written Agreements
Anytime you form a business, you will need to register your business as an entity. Many people enter a general partnership with another business partner. Most states require business partnerships to form an operating agreement, or a shareholder’s agreement and file these documents along with their business registration documents. These legal documents discuss the duties and responsibilities of each partner and the percentages of profit distribution.
Your partnership operating agreement or shareholder agreement should also address the provisions for the transfer of ownership of your partnership. The agreement should specify how you will replace partners should they leave, as well as how to handle disputes between partners. If you are hoping to force your business partner to buy you out, the best thing you can do is carefully read through your operating agreement. The provisions regarding replacing, removing, and handling disputes between partners will inform you as to which options you can take. We recommend hiring a lawyer to review your documents with you and advise you of your legal options before you take any future steps.
Many Partnership Agreements Have Buyout or Sellout Provisions
Many well-written partnership agreements will contain a clause that specifically States how partners should handle sellouts or buyouts. Often these provisions will allow a partner to decide whether or not to sell his or her ownership interest. In other cases, the agreement will state that one partner can buy the other partner out as long as certain conditions are met. Your agreement may have a clause or provision that specifically states what needs to happen when one partner wants to leave the business.
For example, some contracts have a provision that states that when one partner wants to be bought out, the other partner must buy him or her out. Unfortunately, your contract may not include such a clause. Even if it does, the conditions for forcing your partner to buy you out may not have been met. Your right to force your partner to buy you out of the partnership largely depends on the partnership agreement. Some partnership agreements have “Texas shootout” provisions that require a particular condition to take place before either party can offer the other partner a buy or sell ultimatum.
What if Your Business Does Not Have Any Written Agreements?
As mentioned above, the first step is to carefully read through your partnership agreements. However, many small businesses do not have written agreements. When there is no written contract between the partners, state law will provide remedies and rules should one partner want to leave the company. State rules are also important even if you do have a written agreement because not all provisions in a contract are enforceable under Virginia law. In many cases, Virginia law does not offer as many solutions or remedies as are available in a well-written contract.
Petitioning the Court for a Dissolution
Importantly, it will be extremely difficult for your business partner to push you out of the company unless you want to leave. Conversely, if your business partner does not want to buy you out, it will be difficult to force him or her to do so. In certain situations, chords can order a buyout or a dissolution of your partnership. It is possible that you can petition the court to dissolve your partnership, but you will need to prove that there is a fundamental disagreement that is preventing your partnership from operating at all, which can be difficult. Your best option is to engage in negotiations with your business partner and voluntarily come to an agreement.
Engaging in Negotiations
When there are no legal remedies at your disposal, you may need to engage in negotiation with your co-partner. if you have already tried to ask your partner to buy you out and your partner has refused, it is probably because your partner found the financial offer unreasonable. In other words, your partner will be less likely to buy you out if you offer an amount that is too high. Keep in mind that most business partners do not want to keep a partner in the business who does not want to be there because that person may not prioritize the best interests of the business.
You may want to spend some time considering a more reasonable financial offer that is more appealing to your partner. Additionally, you can create a report with appraisals and realistic Assessments of the value you brought to the company and the company’s assets. Entering into negotiations with your partner or partners will be your main way to leave the company as part of a buyout when your partnership agreement does not include a buyout clause. You may even consider hiring a third-party mediator to help you and your partner come to an agreeable buyout offer. When all negotiations fail, there is always the option to attempt to ask the court to dissolve your partnership.
Contact an Experienced Business Lawyer Today
If you would like to leave your business, but your partner is refusing to offer you a buyout, we can help. At Fox & Moghul, Attorneys at Law, our experienced business lawyers know how to advocate for a client’s rights and negotiate complex business deals. Contact us today to schedule your initial consultation.
Recent PostsRecent Posts
- ATTENTION VIRGINIA HOME BUYERS AND SELLERS – NEW LAW REQUIRES SELLERS TO DISCLOSE RISK OF FLOODING TO PROPERTY
- ARE YOU BUYING A NEW HOME? DEMYSTIFYING THE RESIDENTIAL HOME PURCHASE CLOSING PROCESS IN VIRGINIA
- BUSINESS PARTNERSHIP LAWSUITS – DISPUTES BETWEEN LLC MEMBERS, SHAREHOLDERS, GENERAL PARTNERS OR LIMITED PARTNERS
- WHAT IS A WARRANT IN DEBT?
- Direct vs Derivative Claims: Permitting Direct Shareholder Actions for Closely Held Corporations