Todd Goldberg is a partner and member of the executive committee at the law firm of Bernkopf Goodman LLP. Goldberg helps companies create an infrastructure to handle future unknowns and unexpected disputes.
Everyone knows that a divorce can take a toll on one’s emotional and financial well-being. The same is certainly true when it comes to a business divorce between business partners. Whether it be two college friends that have developed a new mobile gaming app or family members that have come up with a new restaurant concept, the possibility always exists two business partners find themselves in a disagreement as to how to run the business or when to sell a business. Then they need to either resolve this dispute or end their business relationship. Goldberg offers his expert advice so business partners, friends and family can remain cordial during a business conflict.
“Without having proper legal documentation in place before disaster strikes, the process of terminating a relationship with a business partner can be both incredibly distracting, unsettling and costly, or in the worst-case scenario, it could lead to failure of the business itself and personal financial exposure. While clients often do not want to spend what little startup money they may have on legal and accounting fees, an ounce of prevention is certainly worth more than a pound of legal bills,” said Goldberg.
“Well-drafted ownership agreements are an indispensable tool in this regard, especially when they include a process for resolving deadlocks between business partners. There is perhaps nothing that threatens the bottom line more than bickering owners.”
“If the dispute itself does not involve a breach of some legal obligation or duty owed by the business owners to one another, then the parties may be without legal recourse, leaving the business in limbo. As time goes on, the bickering may intensify. Having a dispute resolution mechanism in place in advance may enable the parties to stave off a messy business divorce by providing a transparent process that forces resolution of the conflict, whether it be through a buyout of a business partner or having a third party assist in the resolution of the deadlock such as the business’s accountant or counsel.”
“There are several structures and strategies that an experienced attorney can incorporate into ownership agreements to address the dispute in a manner that will allow the day-to-day operation of the business to continue without getting mired in costly and time-consuming litigation. It is far better to deal with these type of matters at the outset when the parties are more willing to strike a compromise and think more level-headedly.”
Goldberg’s final thoughts are, “The consensual always trumps the adversarial.”
This article was written by Robin D. Everson for Small Business Pulse