Question

How do I get out of a business partnership in Ohio?

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Robert J. Dubyak

Answered by:
Robert J. Dubyak

Located in Cleveland, OH
Dubyak Nelson, LLC

Robert J. Dubyak - Business Litigation - Super Lawyers

Answered by: Robert J. Dubyak

Dubyak Nelson, LLC
Cleveland, OH
Phone: 216-364-0500

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Answer

Business disputes among partners are common. Often, partners will have the same vision when forming a company but differences arise or surface as the business evolves. Differences include management style, use of resources, payment, workload, incompatibility and more.

The first thing to do if you wish to get out of a business partnership is to review any existing agreements. Determine if there is a partnership agreement and review the terms carefully. A partnership agreement will provide answers about how to exit the business. In most cases, a partner can opt out, sell shares or renegotiate the terms of the agreement. If negotiation fails and the terms in the original agreement are unacceptable, court will be necessary.

If there is no existing agreement, specific Ohio statutes will determine the outcome. Negotiation is always an option.

Negotiation is often preferred

Partners often include the partnership agreement when creating the business structure. This applies with an S-corporation, a limited liability company and other models. A standard partnership agreement includes individual responsibilities and obligations, as well as exit terms. However, as the business grows and time passes, it is common for one partner to feel that the business is not treating them fairly or that they are worth more to the business than the agreement states. When this happens, a partner may wish to renegotiate the terms.

Renegotiation is a common practice when leaving a partnership but the original document will influence the discussion. If one or more business partners will not agree to negotiation or to let the partner leave, then it may be possible to seek recourse from the court. When the parties are deadlocked, judicial resolution is typically the last resort.

Deadlock and the judicial process

Breach of fiduciary duty is a common argument in court, defined as the other partner(s) sought personal benefit to the detriment of the exiting partner. The court will review if the evidence benefits individual partners or the company overall. Examples may include personal bonuses, unequal access to business-related benefits such as a company vehicle and other abuses. If a partner feels that they are getting an unfair buyout, the court may adjust the original terms based on evidence. In a case where neither partner wants to leave, but instead each partner seeks to buy the other out, the court will determine the course.

Negotiation is the most common approach. Because every business has a unique model, whether there is an existing agreement or not, it is recommended to work with an attorney to negotiate based on your personal situation and the unique circumstances surrounding the business and the reason for leaving.

Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.

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