This question should also be on your mind when you set out to form a partnership.
The best way to protect your rights in a partnership is to have clear, written agreements. Your partnership agreement should specify whether and when a partner can be expelled or bought out and the terms of a buyout or dissolution.
If you are concerned about a partner trying to push you out, you should consider contacting a partnership rights attorney.
They can help you understand your rights under Michigan law and the terms of your partnership agreement. Or if you are just forming a new partnership, they can help you prepare a partnership agreement that protects your interests.
How Does a Partnership Agreement Protect Me If My Business Partner Is Trying to Force Me Out?
Your partnership agreement and any other written agreements between you and your partner are the first place to start in answering the question, Can my business partner push me out?
A partnership agreement governs the relationship between you and your partner and should address things like:
- How you will distribute profits and losses;
- How you will manage the partnership;
- How to resolve disputes between the partners;
- Circumstances when the partnership will be dissolved;
- How the assets will be distributed upon dissolution; and
- The procedure for one partner to exit the partnership.
It is important that you understand your rights under your partnership agreement. Your agreement probably contains directions for dissolving the partnership if you and your partner mutually agree. But it also likely protects you from being involuntarily forced out for no reason.
Many partnership agreements list specific circumstances where a partner or partners may force another partner out. These typically involve circumstances where the partner has engaged in bad behavior that hurts the business such as:
- Breach of fiduciary duty,
- Misappropriating partnership assets,
- Violating the partnership or other agreements, or
- Engaging in illegal behavior.
An experienced partnership attorney can help you review your partnership agreement and determine whether your partner has any ground to force you out. Your attorney can also help you understand how to defend yourself against your partner’s actions.
Can My Business Partner Push Me Out If We Have No Partnership Agreement?
If you do not have a written partnership agreement or if your agreement does not address dissolution, then the provisions of Michigan’s Uniform Partnership Act will govern.
Unless your partnership was set up for a specific length of time or to fulfill a specific purpose that has not yet been accomplished, the Partnership Act allows any partner to dissolve a partnership at any time.
Michigan law also permits dissolution if:
- One partner violates the partnership agreement;
- The partnership cannot lawfully continue;
- A partner dies; or
- A partner or the partnership becomes bankrupt.
The Partnership Act will also control each party’s rights and liabilities upon dissolution if your partnership agreement does not do so.
Can Michigan Courts Force a Business to Dissolve?
Sometimes, a court can force a partnership to dissolve. This can occur where a partner:
- Has become mentally incapacitated;
- Has become incapable of performing his responsibilities under the partnership agreement;
- Committed a serious breach of the partnership agreement or engaged in other harmful conduct that makes it unpracticable to continue in partnership with them; or
- Engaged in conduct that hurt the business.
A court may also order the dissolution of a partnership if it can no longer make money or if other circumstances make it equitable to dissolve the partnership.
Should I Consider a Buyout If My Business Partner Is Trying to Force Me Out?
If disputes between you and your partner make continuing the business together unworkable, you may want to consider a buyout.
Hopefully, you have a partnership agreement that sets up a fair method for determining the value of your partnership and its assets. If this is the case, you may be better off taking whatever compensation you are entitled to and moving on from the business. Continuing in a toxic partnership can be stressful for you and may even negatively affect your business’s performance over time.
However, if you feel strongly about continuing to manage your business, you should not feel pressured to give it up. Your attorney can advise you of your options and help you reach a resolution that you feel comfortable with.
How Can I Protect My Interests?
Having a partnership agreement that outlines your rights and responsibilities is extremely important. Your partnership is unique, and you should not leave its governance to the one-size-fits-all terms of the law.
A strong partnership agreement puts you in charge of your own destiny. You can agree to terms that you and your partner(s) believe are fair. You can also plan for contingencies that may be individual to your business or circumstances.
An attorney can help you prepare a comprehensive partnership agreement that is appropriate to your business. Your agreement will include things such as specific circumstances where a partner can be pushed out and a detailed method for valuing the business in case of a buyout or dissolution.
How Can Miller Law Help Me?
The attorneys at Miller Law have been representing Michigan businesses and entrepreneurs for nearly 25 years. We have extensive experience resolving disputes between business partners, and we understand the complexities of Michigan business law. Call or contact us today to learn how we can help you and your business.