Business partnerships offer a chance for two or more individuals to pool their talents and resources to launch a successful enterprise. However, not all partnerships live up to their expectations. For one reason or another, there may come a time when one or more partners wish for another to sell their interest in the company.
However, if that partner is unwilling to cash out and depart from the business, can the other partners force that member to sell? You may have a few options for doing so, depending on the unique circumstances of your partnership. Learn more by speaking with the New York business attorneys of Levy Goldenberg LLP.
Check First With the Partnership Agreement
Your first avenue to explore is the partnership agreement and the obligations and rights it includes for each partner. Look for any clauses about exit strategies or dispute resolution, and make sure you have a firm grasp on what each partner is required to do under the agreement. If you have no partnership agreement then state laws will govern what happens and you will need to work with experienced counsel to better understand them.
Some of the key questions you need to ask are:
- What are the terms concerning each partner’s rights and responsibilities?
- What are the consequences for someone who does not live up to their obligations?
- How has the unwanted partner failed to abide by the agreement?
- In the event of a partner’s breach of the agreement, what rights and recourse do the other partners have?
- How are disputes with other partners to be handled?
- Upon exit, how will the departing partner be compensated for their interest in the business?
Explore Negotiation and Mediation
The unwanted partner may have expressed resistance to leaving the partnership, but that does not mean an amicable resolution cannot be reached which accomplishes their departure. You may wish to informally negotiate a buyout of the partner’s interest through discussions between you and the partner. Another, more formal option is mediation.
During mediation, a neutral third party known as a mediator facilitates productive negotiations among parties. Mediation may be required as part of the dispute resolution terms of your partnership agreement, and you have the right to have legal counsel represent you during proceedings. Our business litigation attorneys can serve in this role so your rights and interests are better protected.
Legal Options if Mediation Fails
If you are unable to negotiate a mutually agreeable resolution that removes the partner from your business, you will have to escalate matters by exploring judicial intervention. These are a few potential options for doing so:
- Enforce the terms of the agreement: You might be able to file a lawsuit to enforce the agreement by arguing that the unwanted partner has breached the terms of the contract. You will need to identify specific ways in which the partner has violated the agreement, such as misusing business assets.
- Sue for breach of fiduciary duty: If a partner breaches their fiduciary responsibilities, the other partners can sue to demand damages. These damages may require the unwanted partner to relinquish their interest in the company. It may be possible to negotiate this as a solution to the dispute using mediation.
- Dissolve the partnership: In an extreme situation, the other partners may need to dissolve the partnership by going to court in New York. Each partner would then be entitled to a portion of the partnership assets, but this may not be easy to determine. You will likely have to retain the services of an accountant to calculate this.
You Have Rights – We Can Help You Use Them
If your Manhattan partnership is unsure how to force out an unwanted partner, it’s time to retain skilled legal counsel to go to work for you. Count on the attorneys of Levy Goldenberg LLP. You can reach our office today to get started on your business matter.