There are many reasons for business relationship breakups. Sometimes it
is due to retirement, and other times an owner wants to pursue other endeavors.
Oftentimes, businesses are torn apart from conflicts between the owners
of membership interests or shares. Whether the stress of a business relationship
costs more than the benefits are worth or you are simply looking to move
into the next stage in life, our firm is here to help you breakup with
your business relationship.
Our Longmont business attorneys at Jorgensen, Brownell & Pepin have represented many business owners
in their disputes and buy-sell transactions over the years
Here are 5 steps you should follow to ensure our clients get the best outcome possible:
Step One: Figure Out Your Own Priorities
Is your best-case scenario to be bought out? Is it for you to buy another
owner out? What are acceptable outcomes, even if they are not ideal? What
terms would be completely unacceptable? How is the business going to continue
while you are working out the terms of the business relationship breakup?
If your relationship with other owners is too combative, the court may
have to appoint a receiver to act in the best interests of the company.
Since there are multiple ways to effectively break up a business, your
ability to answer these questions is very important in helping our Longmont
business lawyers determine a course of action.
Step Two: Allow Our Attorneys to Review the Rules
Each business has its own set of rules that must be followed to sever an
owner’s business relationship. Oftentimes the rules stem from an
executed Buy-Sell Agreement. In cases where a breach of fiduciary duty
is being claimed, or if no Buy-Sell Agreement exists, the rules may be
in the company’s forming documents. If you are a member of a limited
liability company, the rules usually stem from the company’s operating
agreement. A shareholder of a corporation must follow the company’s
bylaws. Business partners generally have their own written agreements.
Businesses which have not adopted their own rules or whose rules do not
comply with Colorado laws follow Colorado’s business statutes. Once
our legal team knows the rules, we are able to determine the best strategy
to help you achieve your goals.
Step Three: Get a Business Evaluation
Many businesses have the method of obtaining a business valuation built
into their Buy-Sell Agreements or formation documents. If so, those rules
should be followed. As a general rule, the business valuation should come
from a professional consultant which all owners agree upon. In highly
contentious cases, sometimes, each party will get their own valuation
or even ask the court to determine whose valuator should be used.
Step Four: Determine What You Can or Should Pay
This may be based on the business valuation and how that will be financed.
This step is important in approaching negotiations with the company and
other owners. Sometimes, an owner will have all of the funds to purchase
another owner’s interest in the company outright. Other times, owners
have to finance the purchase either through a commercial lender, family
member, the seller, or sometimes even the company itself.
Step Five: Work Out the Agreement and the Closing Deal
This involves drafting the agreement and holding a meeting to memorialize
the transaction. The company will have to resolve to take the seller’s
name off bank accounts, leases, and various licenses, as well as replace
the seller from their former titles and roles within the company.
These steps are a simple explanation of a very complex area of the law.
Even if a smooth transition is anticipated, it is important to be represented
by experienced business attorneys. Many times business relationships breakup
without any transitional problems. However, poor drafting or failing to
fully determine each owners’ expectations can result in major issues
down the road. Due to the complexity and individualized needs of each
owner, the generic steps in this blog do not constitute legal advice.
Only an experienced business attorney is able to give sound legal advice
on this subject.
To protect your interests and avoid problems with your business relationship
breakup, it is important to have knowledgeable business attorneys at your
side. The business attorneys in Longmont at Jorgensen, Brownell &
Pepin are here to help you.
Call us today.