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Business Divorce & Disputes

Desert Valley Law - Business Divorce Attorney in Arizona

Partnerships can be an easy yet powerful business structure, allowing individuals to combine their skills, resources, and expertise to achieve shared goals. However, even the strongest business relationship can fracture and threaten the success and stability of the business. When conflicts or disagreements between owners occur, be it a partnership, limited liability company, or other structure, the result is either reconciliation or disassociation. In Arizona, individuals dealing with these issues can seek assistance from business divorce and partnership dispute lawyers who focus exclusively in handling such cases and are familiar with the specific laws and procedures in Arizona.

Business partners splitting the company they own can be complicated and stressful. Separating business owners has a unique set of issues to consider such as the division of ownership, interest, assets, and debts of the company. With the right legal team on your side, you can mitigate these issues at Desert Valley Law by scheduling a consultation with our experienced business law attorney.Need a business divorce attorney in Arizona? Call us now – (623) 385-3190.

What is a Business Divorce?

Business divorce is generally defined as the legal separation of the owners of privately held business entities. Sometimes, business ventures can grow increasingly emotional and upsetting. More often than not, they are also complicated and can lead to disputes.

Such disputes may also arise for various reasons, such as disagreements over business decisions, financial matters, breach of fiduciary duties, misappropriation of funds, unequal contribution of resources, or conflicting visions for the future of the business. These disputes can disrupt operations, strain relationships, and ultimately jeopardize the partnership’s viability.

A common factor leading to a business divorce is arguments between partners about how certain aspects of the business should be run. Whether you are a majority or minority interest holder, you have rights available to you.  Since emotions and tensions can run high, it is important for your attorney to be aware of any interaction and communication between partners.

What Are the Warning Signs of a Business Partner Leaving?

Below are some signs your company may be facing a business divorce:

  • Broken communication
  • Different working styles not functioning together
  • One partner not carrying their weight
  • Differing business priorities and goals
  • Increasing business disagreements
  • Inappropriate use of business accounts
  • Violations of partnership agreements
  • Lack of respect from a partner

What to Do When You and a Business Partner Are Splitting

If you and your business partner are having a dispute, the following steps are recommended:

Discuss plans for the future

Before you transition to a new business or decide on the future of your business, it is crucial to engage in open communication with your partner. This approach serves to reduce the risk of legal complications and prevent any personal entanglements. Moreover, try to be transparent in your communication to prevent any emotional distress or hurt sentiments.

Discuss your plans with an attorney

There are times when resolving business disputes through litigation can be costly, time-consuming, and damaging to the relationships among owners. Nevertheless, an attorney can review your plans to look into alternative dispute resolution methods, such as mediation and negotiation, in achieving efficient and mutually acceptable resolutions. Prior to making a decision about your future and whether to stay or go, it's beneficial to consult a business divorce and partnership dispute lawyer. They can assess your formal documents and any contracts between you and your partner, ensuring that no conflicting legal matters arise. Having an attorney review your governing documents, which may include an operating agreement or buy-sale agreement, is extremely important. If a non-compete agreement or agreements related to intellectual property were signed, these should also be reviewed. Having help from third parties such as an attorney or CPA, when negotiating terms and coming up with a separation agreement is beneficial. They can accurately value your business and related assets as well as create a buffer between parties if any emotional matters arise. If there are no documents that govern the relationship, an attorney can explain the law as it applies to your situation so that you have an understanding of your rights.

Get a New Appraisal of the Company

Prior to a business being divided or interest being sold/purchased, it must be appraised. If the parties involved can reach a mutual agreement regarding the value of the business and its assets, it is likely that the court will accept their decision. However, if they are unable to reach a consensus, the court will intervene and make a determination. There are various approaches to determining the value of the business:
1. Determining a business's worth based on its income.
2. Asset-based financing evaluates the resale value of both tangible items, like furniture and equipment, and intangible assets, like trademarks and goodwill.
3. Industry formula — utilizing standard valuation approaches used in the industry.
4. Comparable — based on the value of similar businesses.

Keep Personal and Company Assets Separate

Before agreeing to the split, it is advisable to document the balance on any business accounts and credit cards. Taking this step would help you protect yourself from sabotage or any poor decisions made by your partner. It is important to give back any company items, such as technology, data, intellectual property, or confidential information, in order to avoid being held legally responsible.

Call Desert Valley Law

If you and your partner decide to put your faith in a trusted attorney, you can both be comfortable with the decision to split assets or set a price if one of you is buying out the other. At this stage, it is crucial to seek legal advice to ensure that all legal matters and tax obligations are appropriately addressed.

What are The Common Issues During a Business Divorce?

When undergoing a business dissolution, numerous challenges can arise. By enlisting the assistance of a seasoned commercial litigation attorney in Phoenix, you can mitigate the likelihood of encountering the following issues:

  1. Disputes over asset division: An experienced attorney can help ensure a fair and equitable distribution of business assets, minimizing conflicts.
  2. Breach of contract claims: With legal guidance, you can navigate contractual obligations and defend against or address any breach of contract claims that may arise during the process.
  3. Fiduciary duties: In Arizona, as in many other states, a breach of fiduciary duty occurs when the fiduciary fails to act in the best interest of the principal or violates the obligations of trust, confidence, loyalty, or care that are owed to the principal. This can happen through actions like self-dealing, conflicts of interest, negligence, or even fraud.
  4. Disagreements over business valuation: An attorney can assist in determining an accurate valuation of the business and address any disagreements that may arise regarding its worth.
  5. Tax implications: Working with an attorney can help you navigate the complex tax implications associated with a business divorce, ensuring compliance with relevant laws and minimizing potential tax liabilities.
  6. Employment and non-compete issues: An attorney can provide guidance on matters related to employee contracts, non-compete agreements, and any potential employment disputes that may arise.
  7. Intellectual property concerns: If there are intellectual property assets involved, an attorney can help protect and address any ownership or licensing disputes.
  8. Dissolution of partnerships: If the business involves partnerships, an attorney can guide you through the process of dissolving the partnership and addressing any related legal obligations.

 

By consulting with our experienced commercial litigation team in Phoenix, you can proactively address these potential issues and safeguard your interests during the business divorce.

Ways to Reduce Risks in Business Separation and Disputes

To limit dangers, it is crucial to stick to the following regulations:

  • Establish an exit strategy
  • Hire an attorney
  • Document financial statements for the business
  • Reduce company spending, and save receipts
  • Address company debts
  • Consider mediation for your issues

Based on evidence, it has been observed that the state is less likely to contest a business separation if it is undertaken with the purpose of accessing new markets, expanding the customer base, or optimizing existing resources. However, in situations where legal action becomes necessary, the arbitration court is likely to support the taxpayer’s position if they can substantiate the intended objectives of the separation and demonstrate the autonomy of each individual business entity involved.

How Will The Desert Valley Law Help Protect Your Interests in the Business?

At Desert Valley Law, our skilled attorneys will work closely with you to protect your interests and assets during a business separation. Reviewing all business partnership agreements and documents is essential when trying to protect your share of a business.

Reviewing intellectual property and business relationships can be one of the most impactful actions during a business split. Being as transparent as possible with your lawyer will help ensure the best possible outcome during the business divorce process.

Contact The Desert Valley Law today

If you are in need of a business divorce in Maricopa County, Arizona, contact an experienced business dispute attorney at the Desert Valley Law. Call (623) 385-3190 to schedule an initial consultation today.