My Partner Wants to Dissolve the Business and I Don’t: Mediation versus Litigation

A business partnership is a union between individuals that, like all relationships, will no doubt experience both ups and downs. Those downs could unfortunately result in your partner's decision to dissolve the business even against your wishes. If you find yourself contending with a business breakup, then you need to be prepared to exit the union as smoothly as possible while still getting what you want. Sometimes you can do so through mediation, but litigation could ultimately prove your best course of action.

The ideal defense against what could become a bitter battle is the partnership agreement that you hopefully drafted at the outset of your business venture. A partnership agreement specifies how you will operate the business, including how decisions will be made and by whom, who will oversee financial control, the ways in which you will assign responsibilities and even how you will dissolve the business should the issue ever arise. You and your partner should revisit this agreement if your partner opts to dissolve the business without your consent so that you can review the terms to which you both agreed at the outset of your collaboration.

Nevertheless, handling the dissolution of a business on your own may prove quite challenging. For this reason, you may want a neutral third-party to act as a mediator to help resolve your dispute. Mediation can help you and your partner arrive at a consensus to settle your disagreement. A solution could be, for example, that you purchase your partner's interest in the business and therefore maintain ownership. However, you should know that whatever decision you reach through mediation is almost always non-binding since mediation occurs outside of court.

Furthermore, mediation may not be that easy. After all, just like the old song says, breaking up is hard to do! In these instances, the counsel of an experienced attorney can prove invaluable, especially if the dissolution eventually become a case that goes to trial. If you want to contest the dissolution of your business yet you and your partner cannot reach mutually agreed upon terms, then an attorney can file a legal motion, i.e., a lawsuit, on your behalf. Retaining an experienced business attorney will better ensure strategic negotiation ruled by sound legal principles rather than individuals' emotions.

Filing a lawsuit for involuntary business dissolution depends on state law, particularly since a partner's rights based on what percentage of business shares s/he holds vary from state to state. A skilled attorney can help you understand these laws and the rights you have under them. Your Texas business attorney can also analyze any partnership agreement or governing documents that you and your partner developed when you first established your business. Your attorney can clearly articulate the terms and conditions of the agreement to the judge to support your argument against dissolution if and when the time comes for your case to go to court. And unlike in mediation, the litigation decision is binding, which could better protect you and your interests over the long-term.