Read the operating agreement before you sue your partner
Before anyone files anything, read the agreement you signed when the company began. It may already say how this ends.
Most co-owner disputes are decided less by who behaved worse than by what the operating agreement, partnership agreement or shareholder agreement says. Many owners haven’t read theirs since the day they signed it.
Four clauses to find first
- Buy-sell terms: who can force a sale, and at what price
- Valuation: a formula, an appraiser, or nothing at all
- Dispute resolution: court, mediation or arbitration
- Duties: what each owner owes the company and the others
When the formula is old
A buyout formula written for a two-person startup can produce a strange number for a company ten years on. Courts usually hold owners to what they signed, but the wording of the formula, and how it has been applied before, often leaves room to argue.
When there’s no agreement
Then default rules in the law fill the gaps. They may give each owner rights neither of you expected, including the right to ask a court to dissolve the company. That is rarely anyone’s first choice, and knowing it’s on the table often moves a negotiation.
A buyout is a price. Litigation is mostly an argument about what that price should be.
This note is general information about how these disputes tend to go. Your agreement and the law that governs your company decide yours.