It’s Not Me, It’s You: Business Divorces in Partnerships, Closely Held Corporations, and Limited Liability Companies

There are many ways that business partnerships are like a marriage. Both create legally binding obligations on those who enter into them. And just like a marriage, a business partnership requires commitment, trust, and hard work; each person involved must do their part in order for the venture succeed. Despite the colloquialism “it’s just business” the shared experience of starting and operating a new business often results in the forging of an almost familial relationship among the members (even if the business partners where not family members to begin with, which is not at all uncommon).

It is this emotional connection that often forms between business partners that give birth to yet another similarity between a small business and a marriage: the divorce. While the legal term of art varies depending on the type of entity and the specifics of each situation, as a general rule when business partners part ways things get messy. The fight revolves around whose fault it is that things aren’t working out, who invested more in the partnership and, of course, who gets what. If you have ever been through a divorce, or been close to someone who has, these issues probably sound all too familiar.  It is these similarities that have led to the adoption of the term “business divorce” to refer to the process of legal separation between the owners of a partnership or other closely held business entity.

Like the dissolution of a marriage, it is almost always more efficient to negotiate an amicable business divorce. Unfortunately, however, business divorces seem to end up in litigation more often than not. I don’t practice family law, so I cannot make a direct comparison, but business divorces are some of the most contentious cases that I handle. I believe that this is because there is always an element of personal betrayal involved. Inevitably, one of the partners feels taken advantage of by those they once trusted. This emotional component has a tendency to amplify many of the negative aspects that are always inherent in litigation—the stress, fatigue, and worry. Accordingly, I often counsel my business divorce clients to try and “leave their feelings at the door” when evaluating whether or not to file suit.

Sometimes, however, a lawsuit is unavoidable. And in those situations, our goal is always to achieve the best result for our clients, while minimizing the interruption to their life and future business.

Adam Looney

Phone: 281-367-1222

Fax: 281-210-1361

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