Splitting a business may occur as a happy occurrence so the two companies can both grow in new directions, or it may occur a little less cheerfully due to illness or divorce. Many business partners manage to handle the split amicably and professionally regardless of the cause. So why bring in business litigation or counsel in these cases? There are three good reasons to always have the help of an expert when dividing a business.
Determining Fair Shares
It's not always easy to determine who deserves what cut of the profit, or what the party keeping the business should pay out to the partner departing. Even in a friendly split, determining the shares can slow down the process with lengthy discussions. If the discussions can't be held because of illness or other personal issues, the split may drag on for months and years. A business dispute expert helps partners choose a division process and stick to it, which is especially helpful when there are non-cash assets to divide, like specialty equipment or intellectual property.
Lacking Contract Terms
Great partnerships start with a little forethought into what you will do if a split ever occurs. You and your business partner may be best friends outside of the board room too, but unexpected emergencies and life changes can always cause one partner to need an exit. Businesses that grow too well still need to split as well in order to keep growing, so contract terms for dividing and dissolving the company should be set at the beginning of a partnership.
Yet too many start ups are far from formal and begin working together without a specific agreement of any kind beyond a handshake. Since there's no written precedence to work from in these partnerships, it's definitely important to bring in legal counsel that both sides can work with. The partners can reconcile their memories of initial spoken or informal agreements until everyone is on the same page.
Saving on Legal Fees
There are inevitable legal fees involved in any business split. Choosing not to hire a business dispute professional will not make the split free or inexpensive, and in fact choosing to do it alone could cost you and your former partner a lot more. Handling something incorrectly could leave you facing higher tax rates, state fees and penalties, and even legal costs if your partner decides later they weren't happy with their share. Having legal help from the beginning prevents all of these problems to save you money by presenting one fixed fee for the entire process.