If you operate a business with one or more partners and you believe your partner is not handling their share of the workload, you may wonder if you can force a buyout of that partner. While there are many other reasons that a person could seek to pursue a buyout, you should first ensure that you can legally remove your partner from the business. If you require legal assistance dealing with an uncooperative business partner, you should consult with an experienced Maryland forced business buyout attorney.

The team at our law firm understands the chaos that can ensue once business partners no longer share the same vision, and we are here to help you deal with the consequences of that scenario. We can explain whether a business partner can force a buyout of another in Maryland.

Get help from our experienced business advisory attorneys at the Heyman Law Firm by calling (410) 305-9287 today.

How to Force a Business Partner to Sell

If you believe that you and your business partner cannot resolve the issues that are causing the business to falter, you should consider the possibility of forcing your partner to sell their half of the business. However, it would be unwise to assume that your business partner will simply sell their share of the business because you are unhappy with their performance.

Fortunately, there are some legal options you may have to persuade your partner into selling or to force a buyout.

Examine the Partnership Agreement

When you and your partner established the business, a written partnership agreement should have also been drafted. The partnership agreement should dictate how the business will operate and should contain resolutions for issues that may arise over the life of the business.

Many business owners will draft a provision into the agreement that allows for a mandatory buyout of a partner under certain circumstances. You can draft a mandatory buyout clause to trigger when one or multiple factors come into play:

• A partner becomes disabled and cannot continue to handle their business responsibilities
• One partner wishes to retire from the partnership
• A partner failed to uphold the responsibilities named in the agreement

If the partnership agreement includes a mandatory buyout provision and the requirements of a buyout have been met, you should then evaluate the worth of the business and all assets. To avoid a partnership dispute regarding the value of a business and the value of a partner’s share of the business, you should consider hiring a third-party appraiser to help with the evaluation.

If your operating agreement does not have a provision that addresses mandatory buyouts of a partner, you may have to turn to alternative means to break ties with an uncooperative business partner.

It is important to note that if your business is structured as a corporation, you may be able to force a buyout of a partner. This is possible because the partners would be considered as a shareholder of the company, and a majority of partners may be able to effectively force out that partner without their consent. This method may not work with a limited liability company or a partnership because owners typically control an equal share of the company under those business structures.

Dissolution of the Partnership

If you and a business partner cannot agree on terms of a buyout, and the operating agreement is silent regarding the possibility of a buyout, an alternative option is to dissolve the partnership.

The dissolution of a partnership would cause a partnership to be forced to wind up. This means that the partnership will have to pay off creditors and handle other legal obligations before the remaining company assets are distributed between the owners.

The requirements for dissolution will differ depending on the type of business structure you selected for your business. For example, the Maryland LLC Act will determine how the owners of an LLC can dissolve the company. Under certain circumstances, even a minority owner in an LLC could force the company into buying his or her share of the company or possibly force a dissolution of the entire company.

If your partnership agreement or operating agreement does not address buyout procedures, and you do not want to consider dissolution of the business, you may be forced to pursue commercial litigation in the court system. The Heyman Law Firm can help you determine which legal option would benefit you and your business.

Reasons Why a Business Partner May Want to Force the Buyout of Another in Maryland

There are many circumstances that can arise that may cause you to seek the buyout of a business partner. For instance, the following are examples of why a business partner may want to force the buyout of another in Maryland:

Inadequate Performance or Lack of Competence

One common reason for forcing a buyout is a partner’s inadequate performance or lack of competence. If a partner consistently fails to meet their responsibilities, contributes negligibly to the business, or displays a lack of necessary skills, it can seriously hinder a company’s growth and success. In such cases, the other partners may seek to remove the underperforming partner through a buyout to ensure that their business operates more efficiently and effectively.

Strategic Differences

A buyout may also occur because partners may have differing visions, strategies, or goals for their business. If there are fundamental disagreements about the direction a company should take, conflicts can arise that impede its progress. In this case, a partner may seek a buyout to gain greater control over decision-making, align the business with their preferred strategy, or get rid of opposing views.

Financial Mismanagement

Another potential reason why business partners are bought out is financial mismanagement. When finances are mismanaged by one partner, it can pose significant risks to their business.

For instance, when a partner consistently makes poor financial decisions, engages in fraudulent activities, or fails to adhere to proper financial practices, it undermines the financial stability and reputation of their company. In such cases, other partners may want to force a buyout to protect their business’s financial interests and ensure responsible financial management going forward.

Breach of Partnership Agreement

A breach of the partnership agreement can also be a reason to force the buyout of a business partner in Maryland. As an example, a partner may violate their agreement by misappropriating funds, engaging in competing business activities, or failing to contribute their agreed-upon share of resources. These types of actions can significantly harm business partnerships. When the breach of a partnership agreement occurs, the aggrieved partner may seek a buyout as a means to sever ties with the breaching partner and protect their business’s interests.

Misconduct or Unethical Behavior

Serious misconduct or unethical behavior by a partner is another type of behavior that can have severe consequences for a business and its reputation. Examples of this conduct may include engaging in illegal activities, defrauding clients, or engaging in harassment in the workplace. When faced with such behavior, the other partner may choose to force a buyout to dissociate from the individual and protect their company’s integrity and image.

Loss of Trust or Communication Breakdown

Additionally, a partner may be bought out because of a lack of trust or a communication breakdown. Trust and effective communication are both vital for the smooth functioning of a business.

If a partner consistently breaches trust, engages in secretive or deceptive behavior, or fails to communicate openly, then they may cause strain on their relationship with another partner. In that case, a partner may be bought out to restore a healthier and more collaborative working environment.

Irreconcilable Differences or Personal Conflicts

Sometimes, buyouts occur as the result of personal conflicts and irreconcilable differences that arise between business partners. Personality clashes, differing work styles, or disputes over decision-making authority can create an unhealthy and unproductive working environment. In these cases, partners may consider a buyout as a means to end their partnerships and pursue their respective interests independently.

Change in Ownership Structure or Investment Opportunities

Finally, business partners may be bought out because other partners are seeking to restructure the ownership of their businesses or capitalize on new investment opportunities. For example, if a partner wants to bring in outside investors or reorganize ownership shares, then they may need to buy out existing partners in order to make their desired changes.

How Our Attorneys Can Help When Seeking the Buyout of a Business Partner in Maryland

When seeking to buy out a business partner in Maryland, help from our experienced lawyers can be highly beneficial. We can guide you through the buyout process, ensuring that your rights are protected and helping you navigate any disputes or conflicts that may arise.

For example, the team at our firm will assess your partnership agreement, review relevant contracts, and determine the best course of action based on your specific circumstances. Furthermore, we will assist in negotiating the terms of the buyout, making sure that they align with your goals and objectives. Finally, we can help draft and review any necessary legal documents such as the buyout agreement.

You should not wait to let any potential issues worsen. If the conduct of one of your partners is harming your business, then you should seek assistance right away.

Our Maryland Commercial Litigation Lawyers are Ready to Work with You

If an issue with your business partner is severely harming your business, contact an experienced Maryland commercial litigation lawyer. The business lawyers at the Heyman Law Firm possess a great deal of experience litigating a broad range of business law cases, and we would be proud to use this experience to represent you. To schedule a confidential consultation to discuss your legal options regarding a business buyout, contact the Heyman Law Firm at (410) 305-9287, or contact us online.