It is all but inevitable that some internal dispute will arise affecting a business. The manner in which that dispute is handled determines the ability of the business to move forward and be successful. Common issues include:
• Management operations
• When and how to sell the business
• Buy out strategies
The first consideration is to verify the type of business entity. Many consider, for example, co-members in a limited liability company to be partners, when in fact they are not. There are different procedures for handling disputes for different entities. Once a true partnership has been verified:
• Determine whether it is a general or limited partnership
• Determine if there is a written partnership agreement
• If there is a written agreement, determine if the issue in dispute is addresses in the agreement
• Determine if an arbitration clause exists
A shareholder should look to a written agreement, if one exists, to determine if he or she is promised a salary as an employee and has any role in company management. If there is no written agreement, among issues to consider are:
• How much stock is owned
• What salary, distributions or other monetary compensation is the shareholder receiving?
• Are other shareholders receiving greater compensation?
Depending on how much stock is owned and if perhaps one or more shareholders join together, it may be possible to either sue for dissolution of the company or elect a buy-out. Of course in either case, the determination of fair value of the company is of primary importance.