“Breaking up is hard to do,” so sang Neil Sedaka in his hit song from 1960. Sure, it can be hard, but not always. Whether it’s a marriage or business relationship that’s on the rocks, breaking up can be made easier when there’s been some legal preparation and an agreement between the two parties at the start of their union.
In New Jersey and around the country, a business divorce is very similar to a matrimonial divorce (albeit without the china and silverware in contention). A partner of a company decides to leave for any one of a host of reasons and the separation process can go smoothly — or not. Often, business divorces can be contentious, leading to drawn out litigation.
How can I help avoid a messy business divorce?
Making a business divorce go smoothly can be quite a challenge. After all, the term itself implies dispute. But a well-crafted agreement, done in advance, can take much of the pain out of a business divorce. To achieve a suitable agreement, nothing works better than a structured approach to dealing with the company’s mission, operations and initiatives, and to draft an agreement that is mutually agreeable to both partners.
By revisiting the tenets upon which the partnership was originally formed, you may just avoid the need for a protracted legal process. For example:
1) Refer to your company’s governing documents: Most businesses have contractual agreements that direct how they are managed. Those governing agreements list the responsibilities of each of the partners and should direct what happens in the event of a business divorce.
2) Identify any breach of contract by your partner: These critical documents impose legal obligations on each of the partners in many ways, including how the company will be managed, how the finances of will be handled, and fiduciary obligations.
3) Identify breaches of fiduciary duties: New Jersey and many other states place fiduciary duties on each of the business partners to act in the best interests of the company. Whether or not the partners owe fiduciary duties to each other is a complicated question that must be handled by an experienced business attorney.
4) Review the financials: One of the most common reasons for a business divorce is when one partner is accused of mismanaging the company’s finances or wasting corporate resources. That is why financial transparency is of major importance, such that each partner has full access to bank and credit card statements right from the start.
The bottom line: Business divorce cases are complex and unique, and all involve sensitive personal, financial, tax, accounting and employment information. While most New Jersey courts encourage business owners to try and resolve the disputes between themselves, sometimes that proves impossible. Regardless of whether you are a majority or minority owner, it is important to consult with a business divorce lawyer at the first signs of trouble.
Weiner Law Group: Protecting your interests
Jay McDaniel and the business divorce attorneys at the Weiner Law Group provide the experience, guidance and advocacy to protect the interests of the principal owners of closely-held enterprises who can no longer work together. Weiner Law Group is an AV Rated firm representing businesses and their owners in business divorce litigation in New York and New Jersey. Contact us should you have any questions about business legal matters or if you would like a consultation on an impending business divorce.