You may reach a point where you no longer want to stay in business with your partner. In some cases, the relationship may break down so badly that the company cannot function the way it once did. One owner may block decisions, cut off access to accounts or stop communicating altogether.
At that point, you may ask whether you can force the sale or purchase of a business ownership interest. In other words, can one owner legally require another owner to buy them out or sell their share of the company?
The answer will depend on the structure of the business, the agreements in place and the conduct of the owners. In some disputes, the law may allow a court to order a buyout or another legal remedy.
Why business owners seek partner buyouts
Many partnership disputes do not begin because the company failed. Some involve profitable businesses that become difficult to manage because the owners no longer trust each other. Some of the most common situations include:
- Reaching a deadlock over major business decisions
- Getting locked out of accounts or company systems
- Fighting over succession in a family business
- Diverting business opportunities to another company
- Excluding minority owners from management
- Operating without a written agreement
These disputes can become emotional very quickly, especially in family-owned businesses or long-term partnerships. Problems also tend to grow worse when owners wait too long to address them.
What the court may consider
A court will not automatically force a buyout simply because the owners disagree. Courts may review several factors before deciding whether to order the buyout of a business interest. Some of the issues a court may review include:
- The structure of the business
- The terms of any written agreements
- Claims that one owner was excluded from decisions
- Loss of access to financial information
- Whether the business can still operate effectively
Depending on the facts, the court may order one owner to purchase the other owner’s share, dissolve the business or place operations under outside oversight during the dispute.
Why these disputes become more difficult
Many business disputes become more difficult because the owners never created a written agreement. This happens frequently in family businesses or companies formed between friends.
Without clear terms for buyouts, exits or decision-making, owners may rely on default state laws that do not match their expectations once problems arise.
Planning ahead can reduce uncertainty
Business relationships can break down even when the company succeeds. In many disputes, the biggest problems arise because the owners never discussed what would happen if one person wanted to leave, retire or sell their interest in the business.
Operating agreements and buy-sell terms may help establish how owners will handle disputes, ownership changes and deadlocks before conflicts begin affecting company operations, employees or long-term business value.