Basic Training: Bums as Business Partners

Posted on September 29, 2016 in Business Partners

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Q: I have an S Corp that includes myself and my partner, 50/50 ownership. I put in all the capital and do 90 percent of the work. I cannot get my partner to leave the business. What do I do?

A: Whether, and how, you can “kick the bum out” depends on whether you have a written shareholders’ agreement. If you do, and if it addresses issues such as “deadlock,” then you can follow the procedures in the agreement. If the agreement is silent about deadlocks (or if you don’t have a written agreement), then it’s very likely you’ll have to bring a lawsuit to either buy your partner out of the business or dissolve the business. Neither is a particularly attractive option, but the “heavy hand” may be just the leverage you need to get this partner to see sense/cents–as litigation can be costly. 

Also, if you’re doing 90 percent of the work, you may want to consider the pros and cons of threatening to walk away from the business–as without you, there may be no business. Best to consult with a corporate litigation attorney in your area to understand all your options under your state’s law and to get a rough estimate of what it might cost.

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