Traditionally, a divorce is a legal process to end a marriage between two spouses. Once the divorce is finalized, the spouses are free to remarry. A divorce can also be applied to a business partnership.

A business divorce describes a business dissolution or partnership breakup. There’s a fundamental disagreement between business partners who own a company. A business divorce is sometimes referred to as a company divorce, corporate severance, corporate divorce or business breakup. People can end partnerships and businesses for a lot of reasons such as:

  • Soured personal relationship
  • Bad business model
  • Financial strains
  • Bad business decisions
  • Credit issues
  • Unfair competition

What Are the Most Common Claims in Business Divorces?

The most common types of legal claims regarding business breakups involve manager liability in limited liability companies and director liability and officer liability. The legal claims also include:

  • Corporate dissolution
  • Shareholder derivative actions
  • Partnership breakup and accounting
  • Outstanding tax liability
  • Business debt 
  • Financial irregularities

Do Business Divorces always end in Lawsuits?

No. Often business partners may negotiate an end of their business. Business negotiation is a process between two or more parties to reach a settlement out of court. The negotiations usually involve an exchanging things they want such as payment of taxes in exchange for certain assets.

What Happens If I Don’t Have a Formal Written Partnership Agreement with My Business Partner?

Check with a business lawyer. In a business dissolution dispute, how issues are resolved depends on applicable state corporations codes. These codes have outlines that deal with how to resolve disputes with creditors, stakeholders, and repayment.

Should I Talk with a Lawyer About a Business Divorce?

Yes. It’s important to contact a business lawyer regarding a partnership breakup to understand your legal rights and responsibilities.