Many people create a new business with 2 owners each owning 50%.  When times are good, usually at the start of the business, the equal ownership is generally not a troublesome issue.  However, when times get bad, or even when times are good, the 2 individuals may develop different ideas on how to run the company.  Without some ground rules on how to resolve these differences, a management deadlock will result.  If such a deadlock exists, in the extreme case, one of the owners can request a court to judicially dissolve the company.  If sufficient grounds exist, the court will order a dissolution with the company liquidating its assets, paying off its creditors and distributing the remaining moneys, if any, to the owners.

Such liquidation may not be in the best interest of all parties.  In that case, one of the owners may use this circumstance to leverage the other owner to buy him/her out at an above-market price.  This situation can be avoided if the owners sign an agreement at the outset of the business, or even thereafter, stating, among other things, the rules for breaking a management deadlock and/or for determining the price to be paid in the case of a buyout of an owner’s interest.  Such agreement may also include restrictions regarding the sale of the ownership interest to a third party and procedures for handling the death or disability of an owner.

Legal counsel can help business owners anticipate these and other issues and suggest ways to minimize their interruption of your business.

– John Wright, Esquire, is a corporate attorney with Bogin, Munns, & Munns, P.A., a full service law firm with offices in Orlando, Clermont, Kissimmee, Deltona, Daytona Beach, Ocala, Melbourne, Gainesville, and Leesburg, Florida.  Mr. Wright works out of the Melbourne and Kissimmee offices of the firm and welcomes questions and comments regarding the above and can be reached at jwright@boginmunns.com.

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