Business partnerships, like personal relationships, don’t always last forever. Whether due to differences in vision, financial disputes, or personal conflicts, sometimes business partners part ways.
This is often referred to as a “business divorce.”
Whether you’re currently facing this situation or just preparing for the possibility, understanding the legal steps involved is crucial to protect your interests.
WHAT IS A BUSINESS DIVORCE?
A business divorce happens when business co-owners or partners decide to legally separate and go their own ways. This might happen for many reasons, including:
- Different visions: Business partners may have different visions for the future of the business.
- Money: Disagreements about profits, contributions, compensation, or expenses can strain any business partnership.
- Loss of trust: Breaches of trust, such as fraud or mismanagement of funds, are often cited as reasons business partners separate.
- Personal conflicts: Personality differences or life changes can lead to business partners separating.
Whatever the reason, if staying in business together is no longer an option, a business divorce lets everyone move forward, hopefully with minimal damage.
THE PROCESS OF A BUSINESS DIVORCE IN GEORGIA
Separating from a business partner involves several legal steps. Here’s how it typically unfolds in Georgia:
Review the Partnership Agreement
The first step is to review the partnership or operating agreement. This document typically outlines what happens if the partners disagree or want to part ways. It may address:
- Buyouts: How one partner can buy the other’s share.
- Dissolutions: The process for closing down the business.
- Dispute resolution: Whether the partners must use mediation or arbitration.
If you don’t have a formal agreement or if it doesn’t address your situation, Georgia law will determine how things move forward.
Conduct a Business Valuation
Before dividing assets or buying out a partner, you need to determine the business’s value. A qualified appraiser can conduct a business valuation, assessing your business’s assets, liabilities, and overall value.
Negotiate a Buyout
In many cases, one partner wants to stay in the business while the other partner moves on. This is where a buyout comes into play.
To negotiate a buyout, you’ll need to agree on:
- Price: Typically based on the business valuation, unless the partners agree otherwise.
- Payment terms: Will the departing partner get paid in a lump sum or in installments?
- Future involvement: Will the departing partner help with the transition or leave immediately?
A buyout can be a clean and efficient way to handle a business divorce. It can allow the business to continue under new ownership while the departing partner leaves with fair compensation.
Dissolve the Business
If a buyout isn’t an option, you may need to dissolve the business. Dissolving a business in Georgia generally involves:
- Filing for dissolution with the state
- Notifying creditors and settling any outstanding debts
- Dividing the remaining assets between partners based on their ownership
- Wrapping up contracts and other obligations
While dissolution can bring closure, it also comes with a lot of paperwork and financial decisions, especially when partners can’t agree on how to split things up.
Alternative Dispute Resolution
If partners can’t agree on a solution, alternative dispute resolution (“ADR”) offers a way to resolve the conflict without having to go to court.
Two common ADR methods are:
- Mediation: A neutral mediator facilitates communication between both sides and helps them reach a mutually agreed-upon settlement.
- Arbitration: An arbitrator listens to both parties and makes a legally binding decision.
ADR can be a less confrontational way for partners to work through disagreements and avoid dragging out the process in court.
Work With an Experienced Atlanta Business Divorce Attorney
A business divorce can be one of the most stressful experiences an entrepreneur faces. At Thrift McLemore, our Atlanta business attorneys guide clients across Georgia through every step of the process, from negotiating buyouts to dissolving companies. We focus on protecting your financial interests and reducing unnecessary conflict.
Call us today at (678) 882-0830 to schedule a consultation.
