If your relationship with your business partner has gone sideways you may wonder how to force them out of the business.
Similarly, you may be wondering, can my business partner push me out?
This article explores this topic by addressing the most common questions we hear from business partners who are facing a breakup.
At Wood Edwards, we have substantial experience advocating for Texas business owners. If you find yourself at odds with your partner we can help you achieve your end goal, whatever that may be.
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Can My Business Partner Push Me Out?
In most cases, a business partner can’t push you out. But there are ways that a business partner might encourage you to leave or buy you out of the business. It depends on the law that applies to the situation and the agreements in place.
For example, your business partner can seek to enforce a valid buyout agreement. Or they can seek to expel you from the business if they believe you are violating the law or the terms of the partnership or operating agreement. If they are a majority interest holder (or have the backing of the majority interest holders), they might vote to remove you from the business.
If the business is an LLC, it may be more difficult for the business partner to push you out than, say, a corporation.
Frequently Asked Questions
When it comes to getting rid of a partner sabotaging a business, there are many questions owners have. After all, the process is extremely challenging when the other owner won’t cooperate. Here are some of the most frequently asked questions about buying out a business partner and removing a partner from a partnership.
How Can I Force My Partner Out of the Business?
Just like in life, sometimes a breakup is necessary. But what if your partner refuses to leave?
State law and the internal governance documents determine if you can force a partner out of the business. Many times, you can only push them out if:
- The operating or partnership agreement says you can under specific circumstances,
- The business partner is engaging in illegal activity concerning the business,
- The majority interest holders in the company vote to remove the partner, or
- The partners dissolve the business.
The type of business (e.g., LLC, corporation, partnership) also determines if and how you can force a partner out of business.
Not all these examples apply in all cases. For example, Texas provides only extremely limited situations where you can force out an LLC member.
It’s important to talk to a business attorney who represents your interests. If you have an in-house corporate counsel, keep in mind that they typically represent the business—not the individual partners or members of the company. Hence, their advice may be limited to generalities. The only way to get targeted legal advice for your side of things is to talk to an independent, knowledgeable business attorney.
We pride ourselves on being adept business lawyers. We know you didn’t go into business to break up, but it happens. Our clients praise us for our “tenacious” and “dogged” legal representation.
How to get rid of a 50/50 business partner without an operating agreement.
If you find yourself in a situation where your business doesn’t have an operating agreement, we highly recommend contacting an attorney. However, with their assistance, there are various options for handling your dispute. This includes:
- Royalty Agreement—If your company has a product, you may consider exiting with a royalty payment or offering the same to your partner.
- Buyout—One common way to solve this issue is buying out a business partner. Essentially, you convince the other partner to sell their partial ownership of the business to you.
- Dissolution—For businesses that aren’t performing well, dissolving the partnership may be the best option.
Even with all of these paths, some partnership disputes don’t easily resolve. Consequently, lawsuits usually are usually the next step if none of these options suffice.
Can I Force My Business Partner to Buy Me Out?
If you have an operating or partnership agreement with a buyout provision, you may be able to force your business partner to buy you out. To accomplish this, you must first show that an enforceable buy-sell agreement is in place. You may find this as a term in the operating or partnership agreement. Or it might be a separate agreement.
Next, you’d need to show that the situation meets a condition in the buyout agreement. In some cases, you need to show that you would like to leave the business and that they agreed to buy out your interest. Or you have to show that a qualifying or triggering event occurred (e.g., incapacitation).
If your business partner disputes the validity of the buyout agreement or refuses to buy out your interest, you can take legal action. Sometimes consulting a knowledgeable attorney and having them act as a mediator can clear up disputes efficiently. Other cases require pursuing litigation.
Before making any moves, we strongly recommend you talk to a business attorney. Even if you have been in a similar situation before, it doesn’t guarantee that whatever happened last time is what can or should happen this time. Further, reading articles online can provide you with basic information, but it’s no replacement for the advice of a legal professional.
Can One Partner Dissolve an LLC?
In most cases, one partner can’t unilaterally shut down an LLC. A business partner would most likely need to request court permission to dissolve the business if all the partners do not support the decision to dissolve. You do this by filing a lawsuit.
Laws vary, but here are some reasons that a court might dissolve an LLC if not all partners agreed to it:
- The LLC would violate the terms of its operating agreement if it continued or
- The other partner has died or is incapacitated.
Sometimes, the partner seeking to dissolve the business may do so unilaterally if they hold at least 50% ownership interest in the company. Alternatively, the partner must have the support of other members whose interests account for at least 50% of the total interest in the business. Again, it depends on the terms of the operating agreement, the agreement of the parties, and the applicable state law.
Dissolving a business is a big decision, especially if you’re trying to do so without the support of your business partner. Don’t go it alone. Consult a business attorney with the experience to tactfully and effectively handle your case.
The attorneys at Wood Edwards have over 70 years of combined experience assisting businesses, including those on the Fortune 500 list.
Can My Business Partner Force Me to Sell?
Your business partner may force you to sell if the situation falls under the conditions set by a buyout agreement or a statutory exception. Let’s say the partner believes you are violating the law or your obligations to the business. They may seek to remove you, which would involve severing your relationship with the company and selling your shares.
If there is a buyout agreement, it may control. The agreement determines the price of the shares and when and how those are sold. If a buyout agreement is not in place, the parties may need to enter into a buy-sell agreement or pursue litigation.
Retaining the assistance of experienced counsel is critical. These situations are not always straightforward, instead requiring a skilled eye to determine the appropriate course of action. If you or your partner act too hastily or get carried away, it can have a snowball effect. Pretty soon, you can be knee-deep in a complex dispute that nobody wanted.
Skillful attorneys know what phone calls to place, letters to send, and demands to make to effect a smooth but productive resolution. They advocate for you to help ensure that what can be salvaged is salvaged but that you are not short-changed in the process.
Can I Force My Business Partner to Sell?
You can force a business partner to sell if you have a buy-sell agreement in place and a triggering event occurs. Triggering events may include divorce, bankruptcy, or incapacitation. The buy-sell agreement may be in the operating or partnership agreement, or it may be a separate agreement that you and your business partner entered into before.
Can a Business Partner Be Fired?
The ability to fire a partner depends on the applicable law and the terms of any agreements (like the operating agreement) that are in place. It also depends on what you mean by “fired.” If you are firing them as an employee, the answer may differ from if you are trying to expel them from the business entirely.
If you have an operating agreement in place, it may indicate under what circumstances you can forcibly remove a partner from the business. Additionally, you need to make sure that the provision is enforceable under the circumstances.
My Business Partner Is Making Decisions Without Me. What Are My Rights?
When a single partner within a company makes significant decisions independently, the business structure and the operating agreement determine the extent of actions available to the other partner in response. However, it is good practice to gather evidence of your partner ignoring your input in case you seek the help of an attorney. This may include signed contracts, emails, and more.
My Business Partner Is Threatening Me. What Should I Do?
If it’s to the point where your business partner is threatening you, it’s time to involve a good business lawyer. If you neglect to take proper and careful action or fire back or ignore the issue, it can create much bigger problems for you.
My Business Partner Locked Me Out. What Can I Do?
If your business partner locks you out, you have options. Most importantly, talk to an attorney without delay. Sometimes these situations can be solved by having your business lawyer call and speak to the other party. Or they might send an appropriately worded letter. Other cases may call for a lawsuit.
Speak With a Wood Edwards Attorney About Your Situation
At Wood Edwards, we leverage our decades of Big Law experience to provide top-notch representation. But we always give our clients the personalized attention they expect from a small firm. You’re never a face in the crowd or a dollar sign at our firm.
We don’t exclusively do plaintiff or defense-side litigation, making us an agile and adept advocate in the courtroom. We continually strive to find the best and most cost-effective solution to any business dispute that we come across.
“I’ve worked with both Robert and Blake. They are tenacious litigators with tremendous knowledge and skills. They are men of integrity that you can trust without reservation.”
– Attorney Greg Fell
At Wood Edwards, we make it our business to protect your interests and pursue a fair outcome.