Corporate and Partnership Dissolutions
There are times when a business partnership, including a corporation, may wish to dissolve and no longer continue their business relationship. This is a process that is often quite difficult, not only from a business point of view but also from a legal point of view. At GED Law, we can do what is necessary to help move the dissolution process forward and to ensure that your best interests are looked after carefully.
The first thing that is necessary for us to do is to make an assessment of the business relationship and to determine the best course of action that must be taken. This is often directly related to the information that we have on hand. If we are hired to work with the dissolution of the business, we do what is necessary to resolve the matter as quickly and economically as possible.
Taking a Look at the Structure of the Partnership
In any type of corporate partnership dissolution, a minimum of two owners will be involved. It is necessary to determine the structure of the business, which could include an S Corp., a C Corp. or a limited liability corporation (LLC). It may also be part of a general partnership or a limited partnership but would not include a sole proprietorship, because only one owner would be involved. The primary reason why it is important to determine the structure of the partnership is because each will have its own laws that govern the way they are dissolved.
There also times when there may be a coownership of a business, even if a formal agreement has not been signed. At times, this can be an oral agreement between the partners but even if there is not an oral agreement, there may be times when a business relationship has been established. This is often the case when two or more individuals are behaving in such a way that it would establish a partnership on its own.
It is important to identify the dispute which is causing the business to dissolve, provided there is a dispute. In some cases, the nature of the business simply does not exist any longer and it is not possible or beneficial for it to continue. Although it may be an amicable separation, there are still challenges which may be associated with dissolving the business which would require legal assistance.
Although, at times, the dissolution of the business is amicable, that is not often the case. In fact, there are a wide variety of reasons why the individuals within the partnership want to dissolve the relationship. This often goes against what is known as a fiduciary obligation, which is an obligation of loyalty and trust that the partners in the business have with each other. When one or more of the partners begins to misbehave, it can affect the other partners, which could lead to a separation in the partnership. Some of the common reasons why this occurs include the ouster of one of the owners, a lack of disclosure of important information or withholding of profits from the other owner.
When the Breakup of the Business Is Going Well
At times, the separation of business partners goes fairly well on its own. Perhaps the partners agree on an amicable separation, and the business is being dissolved without any major difficulties. In these cases, it may not be necessary to have a lawyer at the beginning but when it comes to winding down the separation, legal help may be necessary. That is due to the fact that winding down of business involves something that is often difficult and painful, the accounting of the business.
Unfortunately, there are many times when one of the individuals or a group of the individuals involved in the desolation of the business try to hide money at the end. This is known as fraudulent conveyance, and occurs when those partners take all or part of the assets, usually being cash, and put it elsewhere. This could pose a potential problem that would represent a serious derailing of the process.
What Governs the Solutions for Business Dissolution?
At the end of the dissolution process, the idea is to have the assets of the business divided up fairly and appropriately. That is why many partnerships, regardless of whether they are having difficulties or not, get legal help when the separation of the partners is coming to a close.
The solutions for dissolving the business legally and appropriately are governed almost entirely by statutes. It can be a rather complex situation and, depending upon the specifics of the partnership, the options that are available may be quite varied. In fact, there are often several different options that are available to wind down the business and to separate from each other.
As is the case with many areas of law, there are often sweeping changes that occur to the laws that deal with dissolving a business. When you use GED Law for the process, we understand the laws in the state of California and can pick the appropriate statues which apply to your situation. This can be a tricky situation on its own, because there may be multiple acts which apply to your business. Those acts may be different, depending upon the year that your company was formed and other factors. We will look into your specific situation and determine which of the acts apply to your business separation.
Although some businesses will wait until the end of the dissolution process to seek legal counsel, it is better to have it from the beginning. Even if you have not yet decided to dissolve the business, it is better to have legal counsel rather than waiting until there are issues that may be difficult to resolve. When you get GED Law involved from the beginning of the process, we will do what is necessary to quickly and effectively determine what is necessary from a legal standpoint.
If Litigation Is Necessary
At times, litigation becomes necessary when the separation of the business partners does not go well. Although there may not be much goodwill between the former business partners, they may decide to work together in this type of the situation. This is especially true of certain details of the business that they do not wish to be aired in public during the litigation process. In order to avoid this, they can take advantage of what is known as private binding arbitration. It allows them to work out these differences without having them be made public.
It may also be necessary to determine how the individual parts of the business are going to be dissolved. This could include the assets of the business, as well as any real property that may be involved. In some cases, there are a variety of choices that are available to the owners, including splitting the assets between each other or selling them, and splitting the proceeds. These options may be determined by the agreement, if a written agreement is in place. If an agreement is not able to be reached, it would generally default to the statutory scheme which fits your business model.