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Ways to remove a co-owner from a business venture

On Behalf of | Dec 22, 2020 | Business Litigation, Partnership/Company Agreements And Disputes |

Starting a business in Texas is a big risk, and it’s hard to go it alone. That’s why so many companies are started by co-founders. Often, one party has the idea, and the other has the capital, and giving away equity in exchange for funding is a very viable way to get a business off the ground.

Why partnerships and companies fall apart

Starting a business with another person is bound to involve some conflicts. Sometimes, these small business disputes can be resolved easily. At other times, the disagreements become entrenched and result in an inability to work together.

In some cases, the two founders will have entirely different ideas about what the future of the company might be. When a dispute becomes intractable, it can be advisable to dissolve the relationship (whether it be a partnership, limited liability company, or corporation).

Dissolving a partnership or company

The easiest and most painless way to dissolve a business relationship is for one party to buy the other out. Typically, the aggrieved owner will approach the other and propose to buy them out.

Having support from others in the company is important when doing this. Such a confrontation can be uncomfortable, but it is a necessary evil. If the other owner holds firm even when confronted, the next best thing is to offer to sell out to them.

All in all, it’s a good idea to craft a plan for this when starting the business. Incorporating an exit strategy into part of the business plan is a very prudent idea. In some ways, it’s similar to drafting a prenuptial agreement before a marriage takes place. Speaking with a qualified lawyer who has experience with small business disputes is a good idea for anyone dealing with a difficult co-owner.