Legal help for disputes arising from partnership buyouts and retirement
An overview of partnership disputes and possible resolutions.
Disputes over the retirement of one partner to a business are becoming more common in Nevada, especially as more and more of the baby boomer generation are retiring or nearing retirement. The reasons are clear:
- For those approaching retirement, it is important to secure a solid financial footing.
- After years of hard work, there can be a lot of financial and emotional investment in the business.
- At or near the retirement of one partner, it is more likely that the partnership has experienced some success. As business assets increase, so too does the chance of conflict.
During buyout negotiations and retirement planning, many partners do not always agree on what fair compensation should be. These disputes most often center around the value of the business and the contributions that the retiring partner brought to the success of the business.
During a buyout dispute, often the main issue to consider is the valuation of the business and the personal goodwill each partner brings to the business. On average, up to 80 percent of the value of a partnership is in goodwill. If the previous partnership agreement did not adequately address the personal goodwill each partner brought to the business, then a dispute can mean a significant amount of money is at stake.
The role of partnership agreements in retirement and buyouts
Fortunately, careful planning can help prevent future legal conflict and expense when it comes to disputes regarding the retirement or withdrawal of a partner. A buyout or buy-sell provision in a partnership agreement can govern the terms of the buyout, the price, the share of the business, and the events that can trigger a buyout.
Yet many businesses do not have adequate partnership agreements in place to address the issues that may arise during the retirement of a partner to the business. Some partnerships fail to have any sort of partnership agreement in place.
Legal grounds for litigating partnership buyout disputes
Whether or not a partnership agreement is in place, a dispute can arise over a number of legal and financial issues. Common allegations during a partnership dispute when one partner is seeking to retire include:
- Breach of fiduciary duty
- Breach of the partnership agreement
- Violation of transfer restriction
- Violation of buyout provisions
- Violation of a covenant not to compete
- Violation of withdrawal provisions
These conflicts center around whether each partner is treating the other fairly, honestly, and abiding by the terms of the partnership agreement or covenant not to compete.
Help with retirement disputes
If you are involved in a dispute regarding retirement, transfer or buyout of a partner, you likely have many questions. At Kerr Simpson Attorneys at Law, our attorneys are experienced in the nuances of partnership buyout agreements and disputes. We are also aggressive negotiators and litigators. Contact our Las Vega, Nevada office to discuss your particular situation.