Practice Area

Philadelphia Business Divorce Lawyer

Most people automatically think of married couples when they hear the word divorce. However, the term also refers to the legal process of terminating business relationships. Business divorces occur in all sorts of companies, from professional service companies (like accounting firms, law firms, engineering firms, medical practices, etc.) to industrial, chemical and commercial companies to real estate developers to high tech and bio tech companies, hospitality and restaurants, retailers, family companies, etc..  Parties involved may include family members, partners, shareholders, LLC Members and key employees.

A business divorce often involves a contract dispute, but what separates it from a typical business disagreement is the complicated nature of the overlap of business interests, the law and personal relationship between the working parties. The individuals involved might be family, friends, or even romantic partners, making the dispute more contentious. The dispute requires understanding the underlying drivers of the dispute, money, power, titles, greed, family and other relationships, psychological issues, etc.  If you are in this type of situation, consider reaching out to an experiencedPhiladelphia business divorce lawyer from the Jacobs Law Group.  We can help you to navigate your way to find your way out of the issues that led to your business divorce.

Neal Jacobs is a leading practitioner in this complicated field and is a sought after lecturer having lectured on this topic for the American Bar Association, the Pennsylvania Bar Institute, the New Jersey Institute of Legal Education, and internationally in the EU and the UK in London for the International Forum Of Senior Executive Advisers (IFSEA).

What Issues Can Lead to a Business Divorce?

Business divorces usually involve owners whose relationship has deteriorated to the point of unbearable friction such that they cannot work together. Acts such as minority shareholder oppression, fraud, breach of fiduciary duty, and defamation, often form the basis for a business divorce.

Minority Shareholder Oppression

When your business partners take an unfair portion of the business’ profits or otherwise advantage themselves at your expense, you may be the victim of minority shareholder oppression.

Waste of Corporate Assets.

When your business partner is spending inordinate sums of the Company’s money on personal matters, whether putting his/her family members on the payroll in no show jobs, or at inflated compensation, or to benefit his/her interests in other companies, or for personal vacations, or significant personal expenses, year-after-year, or on his pet projects that benefit only him/her, then you may have corporate waste that has seriously harmed your company.

Criminal Conduct

It is not unusual for a client to come in and explain that his/her business partner is engaging in criminal conduct.  Whether it is tax fraud, drug use, fraud in sales or procurement, illegal conduct is something we know how to deal with in the context of a business divorce.

Fraud

Fraud occurs when a business associate executes a transaction by using false statements or withholding critical information. The individual responsible may hide the fraud from the other business owners or pressure them into getting involved. A skilled attorney could help an owner disentangle themself from a business partner’s criminal activity.

Loss of Corporate Opportunity

When your business partner takes away a business deal or opportunity for himself/herself rather than allowing the Company you jointly own to profit it from it, that is a wrong for which the court system allows you file in court to either enjoin the wrongful conduct, and/or to sue for damages.

Breach of Fiduciary Duty

Breach of fiduciary duty occurs when a partner does not honor their responsibility to act within the company’s or the other partners’ best interests, causing them to lose money. For example, a partner who gambles away the business profits owed to another partner would likely be in breach of their fiduciary duty.

Defamation

Defamation could involve your business partner publicly disparaging or denigrating you in front of key customers, vendors, other employees or investors.  Insults and defamatory statements are so personal they can easily lead to a business divorce.

Other common reasons to retain an attorney and initiate a business divorce include:

  • Irreparable problems in owners’ personal relationship
  • An unworkable business model that puts owners at odds with each other
  • Credit or financial problems within the business or among owners
  • Consistently poor business decisions by one owner
  • Undermining relationships with competitors, employees, clients

How a Philadelphia Lawyer May Deal with a Business Separation

Aside from litigation, there are many ways to bring a toxic business relationship to an end.

Understanding the Underlying Documents

The first step after you come in talk to us, is for our lawyers to critically examine the existing partner, shareholder and LLC member agreements in your closely held  businesses, this tells us what options can be employed by us your business divorce lawyers.  These documents generally lay out the foundation of the parties’ rights, obligations and duties.  If no such documents exist, or if there is only minimal documentation, then the experienced business divorce lawyer will know to which state statutes and case law to look to determine the rights, duties and obligations of each of the owners.

Negotiating a Deal

Many times a deal can be worked out with the assistance of a skilled attorney.  For example, an attorney who focuses on business divorce cases with the experience of how businesses operate, what is important to the business and to the client, and who understands the impact of each option can assist an owner in negotiating a deal to resolve the disputes.  This may involve separation of employment with a severance package or even a a buyout of one or more of the owners, or for the sale of the entire company. A skilled business divorce lawyer plays a large role in negotiating the deal.

Alternative Dispute Resolution (ADR) Options

ADR is the resolution of a business divorce situation without the need for engaging in actual litigation.  ADR can involve mediation or some form of arbitration.

Mediation is the process of engaging a neutral third party, typically a retired judge or experienced lawyer, to help the parties to resolve their disputes in an amicable resolution.  Mediation is always non-binding.  It is only binding once the parties sign on to the agreement to resolve the dispute.

Arbitration is where the parties engage a neutral third party, typically a retired judge, experienced lawyer or other designee such as an experienced business valuator, to act as the private judge who will render a binding decision on the parties’ disputes.  The award is intended to resolve the dispute and be final and binding on the parties.

ADR can be done before an administrating agency such as the American Arbitration Association (AAA), JAMS, or in a privately engaged neutral without an organization such as the AAA overseeing the process.

Call a Philadelphia Business Divorce Attorney Right Away

If you are at odds with your partners, our law firm may be able to help. A Philadelphia business divorce lawyer could inform you of potential solutions to your problem and take the lead in negotiations or litigation. Contact us today for a consultation.

 

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