Much like marital divorce, a business divorce can be challenging as both partners try to protect their interests as they extricate themselves from the business they have built together. To ensure a smooth transition during a business divorce, partners must understand their business agreements, how the business will be appraised, and anticipate potential conflicts. When you hire Wofsey Rosen, our Connecticut business lawyers will help you navigate the complexities and considerations ahead of you.
Existing Business Agreements Act as a Guide
Business agreements act as a guide for navigating your business divorce. As such, it is essential that you start by reviewing all applicable documents to understand what terms apply to your separation. A well-crafted agreement should outline the rights and responsibilities of each partner, the assets they are entitled to, and the options available to them.
An important factor in a business divorce is whether or not one of the partners has the right or means to buy out the company from their partner. This may be applicable if one partner wishes to continue the business on their own. However, if one partner has a majority stake in the business and the other a minor stake, this can influence whether or not a buyout is feasible. Consulting with a lawyer and a financial professional can provide greater clarity based on your specific situation.
Appraising the Value of the Business and Dividing Assets
Before business partners can go their separate ways, they must divide up shared interests and assets. First, the value of the business must be determined to ensure both parties receive their fair share. To determine your business’s value, there are three approaches you can use:
- Asset-based: Business value is determined by the net assets that the company has. Ideal for investment and real estate businesses.
- Income-based: Business is valued by how much income it has generated or is projected to generate. Tangible and intangible assets are considered in this method.
- Market-based: Business value is derived from transactional data from other comparable business sales in the area.
Regardless of which method you use, it is essential to use qualified professionals who can accurately identify your assets and calculate their value. A business law attorney can often provide referrals or bring in their own trusted professionals to assist. Once all assets have been identified and valued, you can begin discussing how to appropriately divide them.
Planning for and Resolving Disputes
It is not uncommon for disputes to arise during a business divorce, especially if you have arrived here because of unresolvable disputes. You may have anticipated and planned for conflicts when you started your business and established processes for resolving them. If that is the case, follow those now.
If you did not plan ahead for such a moment, consult a business lawyer who can advise you on how to proceed. Depending on your situation, alternative dispute resolution methods such as negotiations, mediations, or arbitration can be useful for reaching an agreement and avoiding litigation.
Considerations for Majority and Minority Stake Partners
Depending on how your business is structured, partners may have a majority and minority stake in the business. Their investment in the company can impact the outcome of the business divorce. It can also create conflict among those preparing to exit their joint partnership.
Whether you are a majority or minority partner in the company, you have rights and should hire a skilled lawyer who has experience handling the complexities of these situations. They can advocate for fairness, protect your interests, and help you uphold all legal and financial obligations. Business lawyers provide sound counsel that can help you smoothly navigate the transition.
Majority Partners
The majority partners may hold more power during negotiations and have more options, due to their larger stake in the company. However, there are checks and balances in place to ensure the business divorce is fair to both parties. They must still negotiate with minority partners and adhere to their legal obligations.
Minority Partners
Minority partners have rights in any business divorce. They can negotiate to buy or sell their stake in the company, as well as request other parting terms. Minority partners may have less leverage in some aspects of negotiations. They often have fewer resources and might require financial assistance. However, they can still negotiate their terms.
Wofsey Rosen Eases the Stress of Your Business Divorce
Wofsey Rosen appreciates how much you and your business partner have poured into the company during its operation. We keep this in mind throughout your case and provide compassionate support and fierce advocacy so you can receive what you are entitled to. Our team helps ensure that the process is as smooth as possible so you can part on terms as amicable as possible. Contact us to schedule a consultation with our team today.