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What is an involuntary dissolution?

| Jul 24, 2018 | Business Law |

You and your business partner both own 50 percent of the company. You have run the business for the last decade, and you plan to run it until you retire.

However, your business partner would rather sell. He or she thinks that the value is as high as it is going to get and wants to capitalize on that and retire early.

The two of you cannot agree on how to move forward, and then your partner decides to seek legal recourse. One potential outcome is an involuntary dissolution. What does this mean for your business?

Essentially, your business partner can petition the court for this involuntary dissolution. If it goes through, the company is dissolved and ceases to exist. The assets that the company controls get liquidated, and then the money from that process gets split up between you and your partner.

This is basically just a way for both of you to cash out your investment in the business.

This may not be optimal for either of you. Yes, your partner gets some of the money he or she was after, but liquidating the assets may not bring in as much revenue as selling an intact company. For you, while you are left with half of the value of the company, you lose the job you planned to do until you retired — and all of the future income that goes with it.

As such, it is very important for both of you to know about all of the legal options you have. You must determine the best course of action for you and for the business.

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