Business divorce involves resolving disputes among co-owners of privately owned companies, including corporations, partnerships limited liability companies (LLCs), and limited liability partnerships (LLPs). Similar to a divorce between spouses, business partners sometimes reach a breaking point where they can no longer work together. For the business owner involved in a contentious corporate separation with a partner, shareholder, or member of a business dispute, we offer a clear path away from a debilitating relationship on the road to better opportunities.
There are many reasons conflicts arise among business partners, including but not limited to the following:
Management
Owners may disagree about the management of the company including over day-to-day operations, investments, allocation of resources and decision-making authority.
Compensation
When owners are also employees of the business, compensation claims can arise based on an employment contract or other compensation-related agreements, services, investment and the like.
Fiduciary Duty
Generally, owners owe fiduciary duties to each other and to the business, including duty of care, loyalty and candor. Breach of fiduciary duty claims may include allegations that an owner engaged in self-dealing, deception, or improperly usurped a corporate opportunity at the expense and exclusion of the company.
Breach of Contract
The company’s governing document, such as an LLC’s Operating Agreement, should set forth how the business will operate and the rights and obligations of the owners. Sometimes disagreements over capital contributions, voting rights, decision-making procedures, transferring and selling shares and how profits and losses will be divided lead to breach of contract claims.
Absence of Transparency & Communication
Like any successful relationship, transparency and candid communication are key to success. If one owner is being less than forthright concerning company transactions, another owner may have the right to inspect the company’s books and records and achieve a formal accounting.
Minority vs. Majority Rights
Minority shareholders may have some protection against oppressive treatment by majority shareholders.
To achieve the Client’s goals, the process may involve a range of potential litigation options, including but not limited to: dissolution proceedings (whether for a majority or minority owners); buyouts; sale of the business; derivative suits; accounting (or books and records) proceedings; breach of fiduciary duty claims; fair value proceedings, or the like. Untangling the ownership of a business may also include analysis of financial, tax, liability, and accounting implications.
At Barnes & Barnes, P.C. we:
- possess the experience to protect our clients’ financial interest;
- know the applicable statutory laws and case developments;
- understand accounting principles and valuation methodology; and
- are well equipped to know that often hidden financial issues need to be investigated and how to bring this forward to our client’s advantage.
Please contact us to discuss your Business Divorce issues.
