What to Do When My Business Partner Pushed Me Out
Starting a business can be exciting and rewarding, but it can also be risky, especially when you have a business partner. It is not unusual for business partners to have disagreements that can lead to one partner being pushed out.
If this has happened to you, it can be a frustrating and stressful experience. But know that you're not alone. According to the SF Office of the Mayor, San Francisco has more than 94,000 small businesses, making up more than 93% of all businesses in the city. This is a common experience.
That is why it is important to know what to do when your business partner pushes you out. If your partner is doing this to you, you need legal advice. Contact the Law Offices of David H. Schwartz, INC today for support. With an office located in San Francisco, California, the firm also serves the San Francisco Bay Area, Alameda County, San Jose, San Mateo, Santa Clara, and Oakland.
Types of Business Partnerships
A business partnership is a legal agreement between two or more individuals to collaborate and work together to achieve shared business goals. This can take the form of a general partnership, limited liability partnership, or limited partnership.
A general partnership is where all partners share in the management and profits of the business equally.
A limited liability partnership is similar, but each partner has limited liability for the actions of the other partners.
Finally, a limited partnership involves one or more general partners fully responsible for the business and liable for debts, while the other partners are limited partners with no say in management.
Reasons Partners Are Pushed Out
You may be wondering: can I push out my business partner; or can my partner push me out of our business? The answer is, generally, yes. Here are some of the most common reasons why business partners are pushed out.
Written Agreement Says You Can
One of the most important things you can do before starting a business with a partner is to have a written agreement in place.
This agreement should outline the roles, responsibilities, and expectations of each partner, as well as what happens if one of you wants to leave the business. If your agreement allows for a partner to be removed, then that's a legal option you have.
However, you need to make sure that you're following the process outlined in the agreement and that you have a valid reason for removing the partner.
Partner Is Engaging in Illegal Activity
If your partner is engaging in illegal activity, then that's a strong reason to remove them from the business. Not only can this activity harm the business, but it can also harm you as a partner.
If your partner is caught, you could be held legally responsible as well. Before taking action, make sure you have proof of the illegal activity and consider consulting with a business law attorney to ensure that you're following the proper procedures.
Majority Interest Holders Vote to Remove Partner
If you're not the majority interest holder in the business, then it's important to understand that the majority has the power to vote out a partner. This is why it's important to have a written operating agreement that outlines how decisions are made in the business.
If you're concerned that the majority interest holders might vote to remove you, then consider negotiating a change to the operating agreement or finding a way to increase your stake in the business.
Dissolving the Business
Sometimes, the best course of action is simply to dissolve business partnerships that exist. This could be for many reasons, such as the business no longer being profitable or that the partners can't agree on the direction of the company.
What to Do When a Business Partner Is Pushing You Out
Working with business partners can be one of the most rewarding experiences in entrepreneurship, but it can also be challenging. With any partnership, there’s always a risk of disagreements, but what happens when your business partner is trying to push you out?
Suddenly, the stakes are higher and your livelihood is on the line. That’s why it’s important to know your rights and take the right steps to protect yourself:
Communicate. Communication is key when it comes to resolving conflicts with your business partner. Before things escalate, try to have an open and honest conversation with your partner. Express your concerns calmly and professionally. Listen to your partner’s side of the story, and try to come to an agreement on how to move forward. If you’re struggling to have a productive conversation, consider bringing in a neutral third-party mediator who can help facilitate the dialogue.
Get an attorney’s support. If communication doesn’t work, you'll want a trusted attorney to support you. Look for a business litigation attorney in particular, who can help you navigate through the legalities involved in partnership disputes. Your lawyer will be able to advise you on your rights, provide guidance on negotiating a buyout, and (if necessary) litigate on your behalf.
Read and understand your contract. When you entered into a partnership, you likely signed a contract outlining the terms and conditions of your partnership. Reread and understand your agreement and take note of anything your business partner may be violating. Review your contract with your attorney and consider sending a formal notice outlining your business partner's breach of the agreement.
Prepare dissolution papers. If you've tried negotiating, and your business partnership isn’t just working out, then it's time to prepare dissolution papers. Dissolution papers, if signed by your business partner, will formally dissolve the partnership. Your dissolution papers should include a proposed disbursement of assets and an accounting of all of the company's debts and assets, and they should be reviewed by your attorney.
Remember that every situation is unique, and the best idea is to consult with an experienced attorney who can provide personalized guidance and help you achieve the best possible outcome.
When It Can Lead to a Lawsuit
If you're being pushed out, and your business partner hasn't violated any agreements, you may need to settle the dispute in court.
In this scenario, to safeguard your financial assets, put a "freeze" on any bank accounts tied to your partnership, and document any harassment or hostile behavior from your partner, which could lead to a restraining order.
Fighting for Your Rights
Being pushed out by your business partner can be a challenging and stressful experience, but there are steps you can take to protect your business interests and seek legal help if necessary.
If you need legal help in San Francisco, California, or anywhere in or near the San Francisco Bay Area, be sure to contact the Law Offices of David H. Schwartz, INC for assistance today