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Legal Landmines – Partnerships and Sinking Ships

Legal Landmines – Partnerships and Sinking Ships

Owner Buy-Sell Agreements Make A Difference

Lifeboats. Owner Buy-Sell Agreements are the lifeboats keeping your business partnership afloat by addressing avoidable internal risks.

Sinking Ships. I woke up this morning to rising water when I found out:

  • I am in business with:
    • my partner’s ex-wife, widow and/or children
    • my competitor
    • someone I don’t know
  • I am running the entire business while sharing the upside with:
    • a departed or incapacitated owner
    • a departing employee/owner who walked away from his employment “commitment”
  • I can’t make estate planning transfers for my family
  • my co-owner sold his interest on lucrative terms leaving me behind
  • my business is dying from an owners’ impasse
  • my co-owners are “free-riding” on my capital without contributing their share
  • my business sale is being held up by a small co-owner’s “ransom” demand
  • my S corporation tax election was terminated by a co-owner’s sale

Plug, Bail or Abandon? Plugging holes requires less pain, cost and effort than bailing against rising water. If neither of these work, abandoning ship may be the final alternative. All business relationships end. Even the record-setting 104-year-old relationship between Ford and Firestone ended acrimoniously in 2001. If you don’t want to go down with the ship, have lifeboats ready for the inevitable and unavoidable! Additional information regarding buy-sell agreements is available in Part II (Buy-Sell Agreement) of this post.

June 13, 2019