Continuing Operations After Firing a Business Partner

Answer:

As a skilled Delaware County Business Lawyer, clients come to me all the time with questions about operating a company after you fire your business partner. If your partner is not holding up his end of business responsibilities, you have a couple of options.

The first option relates to actions you can take if the partner is receiving a salary and you are in control. In such a case, you can reduce the “perks” the partner receives until you get the person’s attention. This may include a reduction in salary, benefits, perks like car payments, life insurance payments, or an expense account.

And termination is an option with the understanding that you are documenting the person’s conduct. In keeping with appropriate corporate documentation procedures, record the reason for terminating the partner. You must reach the same point as if this were any other employee for whom you were terminating compensation.

Unfortunately, you are not terminating the partner’s interest in the company. They still own the shares, still have rights to distributions, should any money be distributed. The person no longer receives a salary, however, because they are not holding up their weight.

If you’re not in control of the company but are instead a minority partner, then you have a more difficult problem. In this situation, the criteria become whether the person is violating their duty of loyalty to you or taking money that is inappropriate. If so, you may need to escalate to the point of litigation to get a response to keeping them under control.

This educational blog was brought to you by experienced Business Attorney Walter J. Timby. Our law firm proudly represents clients throughout Delaware County, as well as Pennsylvania, Delaware and New Jersey.

If you have any questions about operating a company after you fire your business partner, please contact our Delaware County Business Lawyers for a free case evaluation. Let our knowledge work for you.