What are my options if my business partner freezes me out?

by | Apr 26, 2021 | Business Law |

It’s an unfortunate reality in the world of small business that partnership disputes are all too common. It’s not unusual for business partners to disagree on the direction they want to take the company. Occasionally, however, conflicts escalate to the point where one partner improperly tries to freeze out the other. The good news is that, if this happens to you, you have a couple of different options you could pursue.

Getting back in

Sometimes partners freeze each other out by changing locks on the business doors, changing passwords to company systems and generally taking steps to physically exclude their partner from being able to participate in the business. They often try to “fire” their partner as if they were an employee.

Maybe you want to force your partner to let you back into the business. If that is the case, you can ask your attorney to request an injunction from the court. The court will likely want to see your partnership formation documents if there are any.

If your partnership agreement contains a provision detailing the agreed-upon protocol for ousting a partner, and your partner follows that protocol, you might be out of luck. But if your partner is improperly trying to prevent you from running the business, an injunction from the court will force them to restore your access to your business.

Pursuing a buyout

It could be that the wedge between you and your partner is so deep that you just want out. If that is the case, you can seek an order that compels your partner to compensate you for your proportion of ownership interest in the company.

This is particularly easy if you signed a buy-sell agreement as part of your partnership formation. This is an agreement that governs how partnerships will compensate partners who leave the business for their proportion of ownership interest.

If you have a buy-sell agreement that binds your partner to buy you out before they can kick you out, it’s a simple matter of reminding your partner of their contractual obligations. If they still do not comply, you can request that a court enforce your agreement.

Business partnerships can be a complex and sometimes tense relationship. Luckily, the law offers you recourses to vindicate your rights if your partner tries to oust you improperly.