R. Shawn McBride recently spoke about business partners pushing another partner out.
Hey, folks! It’s Shawn here. I get a question that comes up a lot here. People are asking me, “Can my business partner push me “out of the business?” Can I be removed from my own business by something “my business partner does?” And the answer is, “It depends.”
We need to really look at your particular business. Now, when you formed your business, assuming you formed an entity, you probably filed with your applicable state. So you probably did a Certificate of Formation or similar document with your state, and then you probably entered into an LLC Agreement. Let’s hope. A lot of people don’t take that step, but you typically need an LLC Agreement, Company Agreement, or Operating Agreement. Hopefully one of these terms is ringing a bell and you’ve got that. Those two items are gonna govern most of what you do.
If you’re a corporation, very similar to the bylaw shareholder agreements. But, your internal documents are gonna govern what happens here. And if you don’t have internal documents, most of the time you’re probably gonna be looking at your oral agreement, which is very difficult, because now you have your memory and your partner’s memory and everybody’s gotta remember what they provided for the removal of a partner, and you may default back to the statute. So in many cases, if you’re going to the statutory level, it can be difficult to remove a partner.
But, if you’re looking at your agreement, often you have a provision, a well-drafted agreement will provide for removal and replacement of partners from time to time. Additions, removals, because we need to be fluid, and we know partners will come and go. Partners might have criminal activity. There might be other issues come up. Partners might just economically wanna leave. So a well-drafted Partnership Agreement is going to be dynamic and there may be a provision in there that allows one or more partners to push another partner out. This would be some type of buyout, or vote, or some other mechanism.
So, we’re going back to your documents, we’re gonna dig in, we’re gonna look at them in detail. We’re gonna figure out whether that partner can push you out or not. In many cases, if you haven’t signed those documents, you haven’t done the things, it may be difficult. But a lot of times you’ve signed the documents, particularly if they’re sophisticated documents, they will have that provision in there. There’s another warning against internet forms, right? We see a lot of internet forms out in the world. People are using these things over and over again, and are not thinking about what they do. So, if you’re using internet forms, this is one of the things that can come up and haunt you and bite you. And if you formed your company with internet forms, great time to fix that problem while things are still good with your partner.
So, if this is resonating with you, and you have other issues, check out the McBride for Business blog or the McBride Attorneys blog and go to the R. Shawn McBride public page on Facebook. Like it, you’ll get more videos and content for you and your business. And let me know how I can help you. Reach out to me. McBrideforBusiness.com 214-418-0258 Give me a call. Let me know what issues you’re dealing with, what content we can get you, and how we can help you get your business to the next level. It’s Shawn signing off for now. Talk to you soon! R. Shawn McBride
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Katherine Evans.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.
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