How to Remove a Business Partner

A business partnership is often formed because the combination of skillsets amongst multiple people makes the business better. Sometimes, the relationship of the partners worsens to the point of no return. Some businesses choose to close operations so the partners all go their separate ways. But what happens when one or more partners want to remove another partner from the business? How do they do it without compromising the business or themselves? Here are some ways to remove a business partner.

Negotiate a buyout

A buyout is a process where the business purchases the ownership interest of a partner. After the business completes the purchase, the outgoing partner is removed and the remaining partners are free to continue the business. This is often a good solution because the parties agree to the terms of the buyout and can do so relatively fast. Also, if the business has a well written operating agreement, partnership agreement or shareholder agreement, the process is easier because these documents will outline the process the business will follow. Without these documents, the partners have to negotiate the terms of the buyout and hope the partner agrees.

Begin formal removal

If a buyout does not work, the company can formally remove the partner. The company’s bylaws or operating agreement should outline the procedure that the company must follow to remove the partner. These documents commonly call for a vote or consent from the remaining partners, but every business is different. The state does not give much guidance on how to remove a business partner, so if there are no bylaws or operating agreement, the business may need to utilize the other options.

See related: Why Your LLC Needs An Operating Agreement

Ask a court for help

If a buyout or formal removal do not work, the partners may ask a court to remove the partner. This option may not be available if the reasons for the removal are not related to wrongdoing of the partner. If the removal is based on wrongdoing, a court will analyze the evidence of wrongdoing and order a resolution. The business should give this option careful consideration because going to court is expensive, time consuming and the results are sometimes unpredictable. Therefore, the business should consider this option as a last resort.

Plan Ahead

Nearly every business partnership starts on good terms. However, times change so even if things are good now, it is no guarantee the business partners will always get along. A well drafted set of bylaws, shareholder agreement or operating agreement anticipates and solves future issues such as this before they occur. If these documents are drafted by an experienced business attorney, the removal process is simplified. Even if the business does not have these documents, a business attorney can help with any of the steps above to ensure that the removal is completed correctly. If you want to remove a business partner and are looking for an experienced Fort Lauderdale business attorney to make this process easier for you, give us a call or schedule a free consultation today!

Bryant Taylor Law

333 Las Olas Way
Suite 416
Fort Lauderdale, FL 33301

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