Dividing Business Assets During Corporate Divorce in NJ
Corporate divorces in Manalapan and the rest of New Jersey are comparable to marital divorces in many ways. The decision to separate from a business partner can take an emotional toll and create financial strain on all parties. Who gets control of which parts of the business — clients, real estate, office assets — are major questions. Continuing a civil relationship after the corporate divorce may also be necessary.
As with prenuptial agreements prior to marriages, good business agreements anticipate business break-ups. You should consider speaking with an experienced business bankruptcy lawyer at the outset to ensure protection for all parties in the event of a “break up.” On the other hand, while there are two people in a marriage, there can be multiple parties involved in a business. Some businesses need to be completely dismantled with assets divided and parties going their own ways. Other times, one or more people want to leave the business while others keep it running. Regardless of which role you play in a corporate break-up, it’s important to make sure someone represents your interests.
What are the Main Business Divorce Considerations?
How Was the Business Structured?
The business structure (partnership, limited partnership, S Corp, non-profit, etc.) will affect many of the core corporate divorce issues.
The Key Business Divorce Documents
Partnerships and corporations should have documents outlining the terms of a division of assets and the terms of a buyout. Partnerships have a partnership agreement. Corporations have bylaws. These documents, when well-drafted, will set forth the answers to many of the core business divorce questions.
Common Buyout Questions
In a buyout, the business is going to continue operations. So, in addition to figuring out the interest of the person leaving, the company (and the people who run the company) need to make sure the business will run smoothly after the person leaves.
Some of the key buyout questions to consider include:
- How is the value of the partnership or corporate interest determined?
- Before a buyout, what notice requirements are needed?
- Who can be a new partner for a partnership or a new officer/director in a corporation?
- Who retains interest in the equipment and intellectual property?
- What continuing obligations does the person leaving have to the company and what rights does that person have to start a new business?
- Who keeps control or who gets the voting and financial interest of the person leaving?
- What are the tax consequences?
The partnership agreement and bylaws may even explain how to handle disputes – through arbitration, mediation, the courts or some other method.
Some Common Business Dissolution Concerns
Many of the same concerns for buyouts apply to a dissolution of the company. Here, the company is not going to continue. Consequently, the pre-agreement (the business documents control) divides the assets by negotiated settlement or by litigation. In addition to the rights of the people in the company, the company must meet its obligations. It has to pay taxes and employees. There may be long-term obligations such as keeping insurance active for years.
Alternatively, a business might merge with another business. Or a business could change its status from a partnership to a corporation. These transforming events also require a keen business lawyer to analyze all of the legal, business and financial issues. Corporate divorces involving family businesses have additional issues — especially if the divorce is not friendly.
Our Experienced Business Bankruptcy Lawyer Can Help
The knowledgeable attorneys at Garland & Mason, L.L.C. have experience in the full range of business formation structures. We’ve worked with clients to create, manage and dissolve corporations. We’ve assisted clients with corporate buyouts and dissolutions. Thus, we know the legal, financial, practical, emotional and tax issues that may occur from all sides of the transaction, the people leaving the business, the people staying and the business itself.
Consequently, to discuss your business dissolution needs with a New Jersey business bankruptcy lawyer, call Garland & Mason, L.L.C., at (732) 358-2028 or contact us online. We offer a free, confidential, initial consultation to answer your bankruptcy questions. Our Manalapan law firm serves businesses and individuals in Mercer, Monmouth, Ocean, Middlesex and surrounding counties of New Jersey. Our office is handicap-accessible and is just 15 minutes from the New Jersey Turnpike and the Garden State Parkway. Parking is free.