From pooling financial resources to collaborating on ways to maximize a company’s potential, business partnerships can be powerful when parties get along.
However, business relationships can also be complex and changeable. If things between partners begin to sour, even a relatively minor disagreement can become a major issue. Depending on the circumstances, owners may want to consider their options for salvaging the partnership, exiting the situation or pursuing legal action.
1. Mediation
A neutral third-party mediator may help business partners to work through conflicts productively by promoting effective communication and suggesting mutually agreeable terms for resolving disagreements.
2. Buy-out or sell-out proceedings
If partners can no longer work together but would like the business itself to continue, one or more interested parties can buy out a disinterested partner. If all current partners want to disengage but the business is still viable, it may make sense to sell the company to another buyer entirely.
3. Freeze-out merger
When one or more partners have majority ownership, they may be able to freeze out minority owners by merging the company with a newly formed business entity. Under a freeze-out merger, minority owners may receive fair market value for the interest they owned in the original company.
4. Dissolution of partnership
In some cases, it may not be realistic to try to salvage either the business relationship or the business itself. Under these circumstances, partners may want to either voluntarily dissolve the company or file a lawsuit in which a judge determines the outcome.
Litigation is often the last resort for business partners. However, if there are issues with fiduciary misconduct, asset misappropriation or other types of fraud, legal action may ultimately be necessary.
