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Can My Business Partner Change the Locks and Close Us Out?

July 19, 2017 // R. Shawn McBride // No Comments »

R. Shawn McBride recently spoke about documenting important information in your LLC agreement and the risk involved when it is not documented.

Hey, folks, it’s Shawn here with you answering another question that we’ve seen come up in the community. Things people are asking is, can my partner change the locks on our facility? Can they close me out of the business? Well, we need to examine what’s going on here. As always we’re going to start with the applicable state law and the agreement. So let’s start there.

If you have an entity forum, typically a lot of people are going to form an LLC is the most common or a corporation. So we’re probably going to look at that documentation. Therefore what state you’re formed under, that’s going to start providing us some initial guidance on what the company can and can’t do. The next guide is going to come from your agreement, so we’re going to look at the LLC agreement, operating agreement, company agreement, whatever you may have called it, or the corporate documents.

If you’re not an entity if you’re not an LLC or corporation we need to look at your partnership agreement, what you agreed. Hopefully, it’s in writing. A lot of times these are oral, of course, this is one of those things along the way if we stop and document these things before we have these kinds of problems we can be very clear about it.

We need to look at who’s in control of the business under these governing documents and laws. Typically, one partner may be given the authority under the agreements to own, manage and control the business. They’re giving very broad authority. They may have the authority to lock another partner out.

However, most agreements don’t seem to have this level of detail. They split the authority – they don’t have one person having clear control of usurping the other. When we start seeing those kinds of situations we then have a real problem. Because typically one partner can’t do that kind of action without involving the other partner.

So, just tossing it in the air, saying what do most documents say for most companies? Most of the time one partner can’t lock out the other. But you really got to look at your situation and what you agree. Hopefully, you did the homework, in the beginning, got everything in writing and got it put down. If you didn’t, there’s still a chance to negotiate with your partner and work it out.

These are the kind of things that could go to court. The best thing we can do obviously is try to avoid court and get to a settlement beforehand, to reach a reasonable solution in negotiation. You may want to get an attorney involved sooner than later who can help you negotiate through these problems and get to a good answer.

So if this is resonating with you, this kind of problem you might be facing, or even thinking about, check out our blog www.mcbrideattorneys.com/blog and www.mcbrideforbusiness.com/blog. We have lots of great content about this. The R. Shawn McBride public Facebook page has a lot of videos like this. And the McBride for business YouTube channel, subscribe and has more videos like this.

Share this information out to other business owners, and also reach out to me. Let me know what I can do for you. You can reach me at McBride for business, our phone number is 214-418-0258. I would love to know what I can do for you and what issues are keeping you up at night. Talk to you soon. R. Shawn McBride signing off.

Make sure you download our free checklist to assess your business.  

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 stockers 9.

 

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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