{"id":648,"date":"2024-08-08T08:00:00","date_gmt":"2024-08-08T12:00:00","guid":{"rendered":"https:\/\/www.henningmediation.com\/blog\/?p=648"},"modified":"2024-08-05T17:14:10","modified_gmt":"2024-08-05T21:14:10","slug":"navigating-a-business-divorce","status":"publish","type":"post","link":"https:\/\/www.henningmediation.com\/blog\/navigating-a-business-divorce\/","title":{"rendered":"Navigating a Business Divorce"},"content":{"rendered":"\n<div class=\"wp-block-media-text is-stacked-on-mobile\"><figure class=\"wp-block-media-text__media\"><img loading=\"lazy\" decoding=\"async\" width=\"441\" height=\"282\" src=\"https:\/\/www.henningmediation.com\/blog\/wp-content\/uploads\/2023\/05\/blog-3.png\" alt=\"\" class=\"wp-image-151 size-full\" srcset=\"https:\/\/www.henningmediation.com\/blog\/wp-content\/uploads\/2023\/05\/blog-3.png 441w, https:\/\/www.henningmediation.com\/blog\/wp-content\/uploads\/2023\/05\/blog-3-300x192.png 300w\" sizes=\"auto, (max-width: 441px) 100vw, 441px\" \/><\/figure><div class=\"wp-block-media-text__content\">\n<p class=\"has-medium-font-size wp-block-paragraph\"><strong>Business divorces can be very similar to a marriage divorce\u2014disruptive, difficult, and messy. <\/strong><\/p>\n<\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">When a business partnership (the term \u201cpartnership\u201d is used in the generic sense and not to indicate the form of business entity) starts deteriorating, it can be very similar to a marriage divorce\u2014disruptive, difficult, and messy. The business partners are under emotional stress, and their lines of communication break down, usually resulting in adverse effects on the business&#8217;s operations. There are a number of issues to consider in a business divorce.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>1. Legal Entity:<\/strong> &nbsp;The nuances of a business divorce can vary greatly depending on the legal entity involved. &nbsp;For example, the issues involved in splitting up a corporation can be very different from those involved in splitting up a partnership or a limited liability company (LLC), particularly when it comes to taxes.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>2. Form of the Split-Up:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Should the partners try to sell the business to a third party and distribute the proceeds?<\/li>\n\n\n\n<li>Should one partner sell his\/her interest to a third party?<\/li>\n\n\n\n<li>Does one partner want to buy out the other\u2019s interest in the business? &nbsp;If so, the partners will need to reach agreement on the price and terms of the sale.<\/li>\n\n\n\n<li>What if both partners want to stay in the business? &nbsp;In that case, the partners might want to work toward dividing the business between the partners. &nbsp;This often minimizes the significance of the valuation issue, and focuses more on relativity than on absolute dollar amounts.<\/li>\n\n\n\n<li>Should the business go through a planned dissolution and liquidation?<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>3. Valuation of the Business:<\/strong> &nbsp;One of the most contentious aspects of a business divorce is determining the value of the business, which often involves getting business appraisers involved.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>4. Tax Implications:<\/strong> &nbsp;There are tax implications associated with the split up of a business. &nbsp;The tax consequences are very different when a corporation is involved, as opposed to a partnership or LLC. &nbsp;For example, the liquidation of a corporation can result in both the corporation and the shareholders being taxed, while the liquidation of a partnership or LLC can be done tax-free.&nbsp; Thus, it is always wise to involve a tax professional early in the discussions.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>5. Emotional Factors:<\/strong> &nbsp;In addition to the practical and legal considerations, there are often emotional factors at play in a business divorce, especially if the owners have not only a long-standing professional relationship, but a personal one as well.&nbsp; And this can be exacerbated when the partners are also family members.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>6.<\/strong> <strong>Operative Agreements:<\/strong> &nbsp;Ideally, at the beginning of a business relationship the business partners will enter into a shareholder agreement, operating agreement, partnership agreement, or other agreement that determines how the business separation will be handled. &nbsp;Unfortunately, all too often that is not the case. &nbsp;Without such an agreement the partners will be faced with undesirable alternatives, such as suing each other or a forced dissolution and liquidation of the business, in which case third parties or circumstances, and not the business partners, will determine the result.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>7. Mediation:<\/strong>&nbsp; This allows the business partners to call a time out from confrontation and to explore a resolution of the dispute with a neutral third party. &nbsp;In a business divorce, while there may be certain matters that can be litigated, there are often many significant <em><u>business issues<\/u><\/em> that do not involve claims of wrongdoing and thus are not litigable, but they still must be resolved for the business split up to take place. &nbsp;And even if a business issue is litigable, the judge or jury may not be able to resolve the issue as satisfactorily as the partners if they were able to negotiate effectively. &nbsp;The mediation of a business divorce is a unique overlap of \u201cdispute\u201d and \u201cdeal\u201d considerations. &nbsp;Basically, it involves making a deal between disputants who may once have had a good professional, and often personal, relationship, but who have become adversarial, sometimes to an extreme. When it comes to business divorces, having a mediator or arbitrator with specialized knowledge and experience can make all the difference.&nbsp; As business divorces often involve financial, accounting, tax and business issues, working with a mediator or arbitrator who understands the nuances of these issues is critical.&nbsp; <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Pat Jones has been on the Henning panel for over 19 years and brings 40+ years of experience and a unique perspective to the mediation and arbitration table in business divorces.&nbsp; His background includes being a CPA with a Big Eight accounting firm, practicing corporate and tax law as a partner in three major law firms in Atlanta, and serving as General Counsel, CFO and head of investor relations of a public technology company, as well as the Chair of the Audit Committee of a private technology company for 15 years.&nbsp; Pat was also the Chair of the Tax Law Section of the Atlanta Bar Association, and the Co-Chair of the Georgia Limited Liability Company Committee, which drafted the Georgia Limited Liability Company Act.&nbsp; <a href=\"https:\/\/www.henningmediation.com\/bio-jones.php\">Click to schedule<\/a> your next mediation or arbitration with Pat today!<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>When a business partnership (the term \u201cpartnership\u201d is used in the generic sense and not to indicate the form of business entity) starts deteriorating, it can be very similar to a marriage divorce\u2014disruptive, difficult, and messy. The business partners are under emotional stress, and their lines of communication break down, usually resulting in adverse effects on the business&#8217;s operations. There are a number of issues to consider in a business divorce.<\/p>\n","protected":false},"author":2,"featured_media":652,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[10,15,13],"tags":[27,26,19],"class_list":["post-648","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-adr","category-mediation","category-news","tag-advice","tag-best-practices","tag-mediation"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/posts\/648","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/comments?post=648"}],"version-history":[{"count":10,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/posts\/648\/revisions"}],"predecessor-version":[{"id":691,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/posts\/648\/revisions\/691"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/media\/652"}],"wp:attachment":[{"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/media?parent=648"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/categories?post=648"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.henningmediation.com\/blog\/wp-json\/wp\/v2\/tags?post=648"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}