San Antonio Business Divorce Attorney
Helping Texas Clients Get Out of Problematic Businesses
When you hear the word “divorce,” you probably think of separations stemming from marital strife and conflict. Running a successful, closely held business with one or more partners can be fundamentally similar to a marriage: It requires cooperation, communication, passion, and shared goals. However, business partnerships can also falter or deteriorate. A business divorce may be necessary for closely held business entities where one or more partners become unable to effectively work together.
Numerous factors can contribute to the need for a business divorce, but the process for extricating one or more individuals from a business can be highly complex.Our San Antonio business divorce lawyer at Duke Law Firm is equipped to untangle you or your colleagues from a contentious business relationship, no matter the entity’s size or complexity. We understand the sensitivity and stakes in a successful business divorce and are prepared to do whatever it takes to facilitate an efficient transition.
When Should I Consider a Business Divorce?
No one enters into a business relationship because they expect to ever have to deal with a divorce. Still, there may come a time where you and your partners are no longer able to cooperate. It is important to recognize scenarios where a divorce may be necessary to protect yourself and/or the business’s interests.
Business divorces are not limited to any one type of entity and could become necessary in any relationship where one or more partners are involved. Even if a business is started with the best of intentions, there are many situations where the entity and relationships within evolve to the point where continued partnerships are untenable.
Business divorces can be triggered by a number of contributing factors, including:
- Mutual separation. If a partner is retiring or electing to pursue new ventures, leadership may be able to agree to a mutual separation. While this cause will hopefully avoid protracted or ugly conflicts, the departing partner will still require formal extrication from the business.
- Personal crises. A partner can experience one or more of numerous potential personal crises, including a marital divorce, serious injury, birth of a child, or even death, each potentially necessitating the need for their removing themselves from the business.
- Inactivity. If a business partner is neglecting their duties, they place an undue burden on the other partners. It may become necessary to explore how to remove them from the entity and relieve them of responsibilities.
- Partnership and shareholder disputes. Disagreements over the management of the business’s direction can potentially become irreconcilable and require the departure of a partner.
- Personal disagreements and partnership departures.When a company transforms as a result of the leaving of another partner, the reformed entity might become untenable. Personal disagreements between partners might also make continuing the business arrangement unsustainable.
- Litigation between partners. While never ideal, you might begin to suspect one or more partners is behaving fraudulently or unlawfully, including even stealing from the company. The resulting litigation may necessitate your removal from the business to protect yourself from liability.
- Partner bankruptcy.A partner declaring bankruptcy can endanger the business and its assets, potentially requiring you to consider extricating yourself.
The bottom line is any situation where a business is unable to operate smoothly as a result of continuing partner conflict should prompt you to consider a divorce. Partners will naturally face major conflicts in the course of building and running a business, but you may encounter problems that will imperil your ability to continue working together.
You should not attempt to facilitate a business divorce on your own. Experienced legal representation will likely be necessary to manage an effective business dispute, regardless of the business’s entity type. Any split or extrication needs to be handled with the utmost care, especially when such a radical change to a company’s structure could fundamentally alter its identity and goals. You will also want to make sure your interests are protected throughout the business divorce.
How Should a Business Divorce Be Handled in Texas?
Like in marriage, a business divorce is not merely a symbolic gesture: It is a legal separation between multiple parties that make up the current business. You will want your business divorce to be handled as efficiently and painlessly as possible, which includes filing all relevant paperwork with government entities and addressing any conflicts that might arise between partners or other regulatory bodies. This typically requires the involvement of a qualified legal representation familiar with the process involved with business separations.
Our San Antonio business divorce attorney can help you address manage elements of a business divorce, including:
- Regulatory compliance. Certain industries, like the medical industry, require business entities to fulfill certain obligations when undergoing a separation.
- Evaluating employment agreements. The departing partner is likely to have some form of employment agreement that specifies certain conditions or entitlements. Those terms will have to be met or addressed in order to properly extricate someone from a company.
- Drafting, negotiating, and ratifying terms for partners. If the business entity is to continue operating after the departure of one or more partners, new terms will need to be created for the remaining co-owners. The departing partners will also likely need to have terms enshrined in a legal agreement.
- Clarifying ownership of intellectual property. Many businesses operate with trade secrets and other valuable pieces of intellectual property leveraged to the company’s benefit. Legally establishing who owns what is critical in any major change of leadership.
- Forensic accounting. If you suspect one or more partners may be involved in fraudulent or otherwise unscrupulous actions, it can be important to conduct thorough investigations to protect you and the business from liability.
- Business and asset valuation. In many business relationships, a departing partner or co-owner will be entitled to some share of the business’s value they helped generate. A professional appraiser will likely need to determine the precise value of the business and its assets at the time of a divorce.
- Resolving outstanding agreements and litigation. If your business is entirely dissolving or if the departing member was involved in any agreements or litigation, the outstanding items will need to be addressed.
- Assessing tax positioning. When the makeup of a company’s ownership changes or if a company is outright dissolved, there can be significant tax implications for the company and its co-owners. Both your individual and business liabilities should be assessed following any major structural change.
- Address minority shareholder rights. If the removal of a partner is involuntary, careful maneuvering within the company’s corporate structure may be required. Minority shareholders have certain rights that must be contemplated and honored to avoid additional complications.
A business divorce requires an intimate, extensive knowledge of business and employment law. We can help evaluate the specific circumstances of your business and work to make sure all potential obstacles are addressed to ensure as smooth a transition as possible.
What Are Some Solutions for Facilitating a Business Divorce in Texas?
The nature, scope, and procedures involved in a business divorce will depend on your entity’s corporate structure, circumstances specific to your business’s operations, and whether the partner is voluntarily or involuntarily departing. This is part of why retaining a skilled attorney is so important. To be successful, business divorces must be specifically tailored to the company’s situation and needs.
Some strategies our San Antonio business divorce lawyer can help you explore include:
- Negotiated resolutions. This is often the ideal scenario, where co-owners amicably agree to the change after negotiating terms. If one or more partners is departing a company, this often involves some form of a buyout or sale of assets as well as terms by which they must abide.
- Leveraging existing contracts. Most companies will have extensive employment and operating agreements defining the business’s corporate structure and how leadership changes can be handled. You can potentially enforce provisions of these agreements to facilitate a business divorce under the terms that have already been established.
- Corporate reorganizations. Sometimes referred to as “squeeze-out” reorganizations, problematic partners can potentially be divorced through a combination of mergers, acquisitions, and transfers.
- Shareholder tools. Shareholders have legal rights that they can exercise if they suspect corporate officers are not fulfilling their obligations. You may be able to facilitate a removal through filing injunctions, individual claims, or derivative actions.
- Dissolution and breakups. Certain types of companies, like Limited Liability Companies (LLCs), can be more simply dissolved, though certain outstanding company obligations may need to be addressed in the process.
What Happens If a Business Divorce Becomes Contentious in Texas?
If you are struggling to maintain control over a company with a corporate officer that has gone rogue, there is a good chance they may resist attempts to be removed from the company. Many business divorces can unfortunately turn contentious, often requiring the adoption of some additional preventative strategies to facilitate an extrication.
As unpleasant as a contentious business divorce can be, you will still need to go through the necessary legal processes to protect your professional future and the wellbeing of the business. Should the offending party truly become unmanageable, additional steps can be taken to minimize confrontation and streamline the divorce as much as possible.
Should your business divorce become contentious, our San Antonio business divorce lawyer has experience in the following solutions:
- Arbitration and mediation
- Temporary restraining orders and/or injunctions
- Lockouts and freezeouts
- Oppressed minority shareholder actions
- Termination of employment of shareholders
- Corporate rights of dissent
- Negotiated buyouts
- Resolving deadlocks among shareholders or officers
- Appointment of receivers or special fiduciary agents
Minimizing the Consequences of a Business Divorce
Though one hopes they will never need to go through a business divorce, preemptive steps can be taken to minimize consequences should one ever become necessary. Preventative measures can help protect you and your business’s interests in any future conflicts that might develop.
For example, you should be thoughtful in how you structure your business’s corporate governance, including any procedures for handling disputes, through shareholder, partner, and other operating agreements. You should also be proactive about enacting formal protections for your business’s copyrights, trademarks, and other forms of intellectual property, including any relevant nondisclosure agreements needed to protect trade secrets. If you are involved in a privately-owned company, there should be succession plans in place should one of the partners become incapacitated or pass away.
We Can Help Facilitate Your Business Divorce
Pursuing a business divorce is rarely a desirable scenario, but sometimes tough decisions must be made for the good of a company, its shareholders, and its partners. Our San Antonio business divorce attorney at Duke Law Firm has experience resolving governance disputes when moving through the stages of a business divorce. We can help evaluate what steps you should consider to support a timely and effective transition. Our legal services are cost effective and scalable: We have worked in transactions as large as $10 million and have been involved in numerous industries. Our lawyer is also a business owner himself and understands the intricacies involved in navigating these issues.
Business divorce occurs when two owners or more, have decided that the relationship that they first started no longer works for various reasons.