What is Business Divorce?

When business partnerships have run their course, it might be time for a business divorce. Similar to the end of a marriage, a business divorce involves taking into consideration the assets and debts of a company, determining how to distribute them, and legally severing the relationship between small business owners.

Reasons for Business DivorceBusiness Divorce Atlanta

Many events can trigger the need for a business divorce. Partnerships may dissolve because partners no longer share the same goals and expectations for the business. Small business owners may begin new ventures or start to pull away from the business. A poor business model or financial problems may also lead to a business divorce. When partnerships can no longer be maintained, there may be little choice but to sever the legal relationship between partners and dissolve the business.

Issues Involved in Business Divorce

When a business must be dissolved, there are often several major issues that must be addressed. Business debs, including legal and tax liabilities, must be dealt with. Partners may disagree on the prioritization of certain debts and current obligations to lenders. Underlying problems that contributed to financial difficulty may need to be identified and rectified. Long-term liabilities such as leases must be addressed, as well as contingent or future liabilities such as personal guaranties of the partners. Other common issues include how to deal with the termination of employees and whether owners will be permitted to operate a new or successor business within the same industry.

Legal Rights and Obligations

Well-prepared business owners obtain legal assistance at the start of new business venture, including the preparation and execution of a shareholder, operating or partnership agreement that includes provisions regarding future dissolution of the partnership or company and winding up the affairs of the business. Absent such an agreement, the rights and obligations of small business owners are established by state statutes and applicable case law. In either event, it is important to consult with qualified business counsel as soon as a disagreement or possible event of dissolution occurs.

For legal guidance and assistance when dealing with a business divorce, contact the experienced partnership and shareholder dispute attorneys at the Atlanta law offices of Brownstein & Nguyen.