Change is a constant in life, and as time passes and the unexpected occurs, business partnerships can shift. When business situations need to change, it can be challenging to fairly and amicably separate assets and debts, allowing for a clean shift into the next phase for all involved.
Much like a marital divorce, a business divorce is a legal process by which a split between business partners can be managed by a property division lawyer to ensure equitable outcomes. Buyouts and offsets in a Frisco business divorce are some of the most common methods used to arrive at these outcomes.
There are many ways that individuals can be legally and professionally tied together for business purposes. These may include formal or relatively informal business partnerships in which two or more individuals have agreed to share profits, losses, and decision-making duties in a business. Formalized agreements could include Limited Partnerships (LPs), Limited Liability Companies (LLCs), and family-owned businesses.
All of these arrangements bring their own set of benefits, but complications can arise when it comes time for business partners to part ways.
A business divorce is the process through which individuals who have jointly owned and operated a business come to a legal and financial separation, oftentimes involving buyouts and offsets. With the help of an experienced Frisco attorney, the separation will require untangling financial connections, determining liabilities for any outstanding debts, and assigning future business assets and operations.
The most straightforward way to handle a business divorce in Frisco is through a buyout or an offset. In a buyout, one party in the business arrangement purchases the other’s interest in the business. In this exchange, the person being “bought out” receives a financial payout, and the one making the payment receives that person’s stake in the company. A buyout is often preferred for tax purposes or if the company intends to continue operating. Buyouts allow for smooth continuity with little disruption to day-to-day operations.
In some cases, the legal documents defining the business relationship have buyout clauses that lay out the circumstances under which one entity can, or must, buy out the other. Common buyout clauses include breach of duty, misconduct, voluntary withdrawal, retirement, or death.
Often, a buyout will require a valuation from a third party to ensure that the amount offered is fair. This valuation may become a part of negotiations and disputes.
An offset may occur as part of the negotiations and legal proceedings during a business divorce in Frisco. Offsets are typically required when one business partner has been found to have taken excess distributions, used business assets for their personal gain, or caused harm through a breach of fiduciary duty. To put it simply, an offset may be required to reduce a buyout amount in order to adjust for these circumstances and ensure equitable division.
There are many complicated considerations to make during a business divorce, especially if there are disputes about equity or irreconcilable differences between the parties. A knowledgeable lawyer could help advise and guide you through the business divorce process.
If you are ready to make a change in your business and split from your current partner, we are here to help. Call now to discuss your next steps, including buyouts and offsets in a Frisco business divorce.
Our Law Firm’s approach to your case is based on individual circumstances. Whether it is a simple negotiated settlement, or it requires an aggressive approach, we will protect and defend your best interests.
