“Business divorce” is a newer term that refers to instances where business partners decide to part ways from one another. This usually refers to the dissolving of a partnership or some other type of business dissolution. It usually refers to situations where the partners or business members are moving on to other activities, rather than completely stopping all business endeavors.
As in domestic family law divorces, business divorces can involve a wide variety of issues. These can involve the splitting of business property, division of profits or debts, and liability for violations. Business divorces can also present similar issues in terms of emotions, personal conflict, and changes in lifestyle.
There are many reasons why business partners might experience a split. These include:
- Personal disagreements
- Unpaid taxes
- Excessive business debt
- Lack of growth (both personally and business-wise)
- Fraud or misrepresentation amongst partners
- Breach of contract
- Disputes over a business plan
- Lack of proper business agreements or documents, such as a failure to create an operating agreement or a shareholder’s agreement
Generally speaking, many business divorce situations can be prevented, or at least made less complicated, through proper business planning and the use of well-written contracts and agreements.
Business divorces can create a whole range of different legal issues that must be dealt with. If you are involved in a business divorce, or think that you are about to be, some tips to follow include:
- Make sure you gather and organize important business documents. These can include initial partnership agreements, business contracts, and business records. In particular, pay close attention to documents that speak about ownership and division of property.
- It helps to tie up unfinished business endeavors and uncompleted issues from the past, especially taxes and unpaid debt.
- Some investors see business divorces as an opportunity to enter the picture and gain profit from either party. Protect yourself and your assets during this time of financial sensitivity and vulnerability.
- In some cases, a partnership may automatically dissolve if one partner is unable or unwilling to continue. Do some research to determine what remaining rights you have if you wish to continue doing business without your partner.
- Business divorce can often be a painful experience. Be sure to consult with a counselor or psychiatrist if needed.
Lastly, it may be necessary to consult with various professionals during such times. These can include accountants, property appraisers, lawyers, and tax professionals. Working with a professional can help prevent further complications down the road.
Business divorces can often be very stressful, complicated situations. You may need to hire a business attorney in your area if you need any advice, legal guidance, or representation during a business dissolution. Your attorney can provide you with in-depth information on how to protect your assets and how to move forward after a business divorce. If you need to attend court proceedings, your lawyer can be present to guide you during those times as well.