Avoiding a Messy Business Divorce

by Nathaniel H. Wadsworth on Jan. 09, 2020

Business Business Organization Lawsuit & Dispute  Litigation Business  Contract 

Summary: Careful planning can help you avoid a messy breakup with your business partners.

            The late Mickey Rooney once quipped: “A lot of people have asked me how short I am. Since my last divorce, I think I'm about $100,000 short.” There are many who could say the same thing about a business divorce.

            When people come together to begin a business, they may not think the time will come when they will not get along. But if, after many years, you and your business partner no longer see eye-to-eye when it comes to how to operate your business, what is to be done? If you planned ahead, then you may have a detailed agreement to direct you on how to move forward. Such direction may involve one partner buying out another, for example. However, if you failed to plan ahead, you may be facing the possibility of leaving the fate of your business up to a court.

            Under Arizona’s statutory scheme, a shareholder of a corporation or a member of a limited liability company can petition a court for a dissolution of a company if there is a deadlock in the management of the company which adversely affects the business. And even though the court might allow one shareholder to buy out another in order for the business to continue on, there is no guarantee that the business will survive one owner’s efforts at dissolution. Such an action may even involve the appointment of a receiver to take over the operations of the business while the court case plays out.  Whether or not the business survives such a court action, the financial cost to the business and its owners may be enormous. This is especially true if the action involves claims of wrongdoing.

          If you are unable to amicably end business with a partner, then litigation may be necessary. In that case, an experienced litigator can represent you to protect your interests. 

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