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Does a partnership buyout need to go to court?

On Behalf of | Dec 9, 2023 | Partnership Disputes

Some business partnerships end in a pre-arranged fashion. Partners may have agreed to list the company for sale after a certain number of years or dissolve the business once they achieve certain goals. Other times, each partner may have a different long-term vision for the organization. Those who previously held the same goals may shift their perspectives over time. One partner may want to retire or move into another industry, for example, while the other wants to continue operating the business.

When partners are no longer in agreement about what should happen with the company, they may need to consider a buyout. The conflict between them could otherwise potentially harm the business. A buyout will inevitably mean big changes at the company, and partners may not see eye to eye about the details. If so, will a buyout scenario need to go be ruled on in civil court?

Partners can negotiate their own terms

Some partnership agreements already include clauses addressing the possibility of a buyout. Partners may have already established a specific valuation method that they will use or a particular amount of compensation that either partner would need to provide to the other in a buyout scenario.

Even if the partnership agreement does not detail specific terms for a buyout, the partners may be able to reach an amicable decision about the terms for a potential buyout. Provided that there is an agreement about the timeline and exchange of resources involved, a partnership buyout does not need to go to civil court. The partners can likely handle the process within the comply.

Litigation is sometimes necessary

While avoiding court is often a goal for those embroiled in a business dispute, civil lawsuits are sometimes necessary. One partner may accuse the other of embezzlement or a contract breach. It may be necessary to have a judge review the situation and determine what is appropriate according to the partnership agreements, state law and relevant business records. In some cases, one partner may choose to file a lawsuit not in hopes of going to court but instead to push the other partner into compromising and working with them.

With all of this said, those who review their contracts and try to resolve disagreements amicably may have an easier and faster time arranging a business buyout than those making arbitrary demands or insisting on litigation. Every situation is unique, which is why seeking legal guidance when such disputes arise is generally wise.