R. Shawn McBride recently gave tips to move forward with partner’s disagreement.
Hey folks, Shawn here talking about another common issue we see. How do we deal with partner disagreement? How do we work through this issue? Well, the lawyer in me says go to the documents, and that’s usually the first place we’re going to start with. Somebody comes to me, and they’re having a partner disagreement, one of the first things I want to do is look at the underlying documents. I want to look at the state law where that partnership is formed, and I want to look at the documents that are signed.
Now partnerships take many forms. We used to term partnership very generally. It could be an LLC, could be a corporation, or could be another entity. How do we look at what controls? Well, the legal documents are really going to be our first line of inquiry. That’s really going to tell us what the legal rights are. Doesn’t necessarily mean the answer we’re going to get to, but it tells us where things are arranged.
So those dusty documents that you signed early in your business, a lot of people use internet forms and other stuff they don’t think about. This is where the stuff starts to come back and unfortunately doesn’t help you, so this is why we want to get ahead of it when we can. We want to get ahead of these issues.
We want to get these documents set up right at the beginning or if the things are going well, it’s a great time to revisit them and say hey let’s get these documents updated in case we do have a disagreement. So the first thing we do is going to look at these documents. We’re going to see what the rights are.
Often they have a disagreement provision. They provide what’s it going to do. It may be good. It may be bad. It may set forth a mechanism. Sometimes there’s a mediation or arbitration. Sometimes there’s a buyout provision. That’s really the legal remedy. That kind of tells us what our baseline is, what our possible outcome is, and then from there, we want to negotiate.
The best thing we can do in all of these situations usually is protect the value of the business, and that means conversation, discussion, working together. Get the business owners in the same room talking about what’s happening in the business. Make sure we all understand each other, and from there we take that information and that stuff and we come up with a solution that works for both the partners.
The best thing usually is an orderly exit. One of the partners leaves. The other partner buys them out, maybe a direct cash buyout if there’s enough money around. A lot of times there’s not, so it could be a timed payout over time, so the partner exits. Now we’ve got the business value protected, we’ve maximized the amount of money there, bigger pot because we haven’t wasted time with lawyers and destroying the value of the business, and the business is moving forward, so we want to negotiate outcomes. Starting with the documents and then moving to a negotiated outcome.
Now it’s usually something a business owner probably doesn’t want to do on their own. You can negotiate this on your own, but you really need to know what your legal rights are, and you also need to think strategy, so you want that outside perspective.
So if this stuff’s resonating with you, check out our blog www.mcbrideforbusiness.com/blog, www.mcbrideattorneys.com/blog, R. Shawn McBride public page on Facebook has a lot of great videos like this that will help you with these situations.
Of course, I work with business owners a lot of these situations. The McBride for Business YouTube channel has some great videos too. Check it all out, collect some resources, and let me know if I can help you. R. Shawn McBride. Talk to you soon.
Each case is unique. Past results do not guarantee future outcomes. This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. FreeImages.com Sharon Brucker.
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