Originally from Dispute Resolution Journal

This article suggests using represented negotiations to resolve issues arising in a business divorce, such as the breakup of a medical partnership or a family-owned business. The author argues that negotiating the split-up has advantages over going to court.

Much of my 22-year legal career has involved litigating and arbitrating disputes between owners of closely-held businesses, many of which are family owned. The time often comes when the owners decide they no longer wish to work together. Whether certain owners will depart, or the business will be terminated altogether, the parties usually are quite angry and frustrated and they blame each other for everything. These feelings create conditions ripe for litigation. It usually takes several months after a lawsuit is filed before passions cool sufficiently to even try to negotiate a settlement. But by that time, the parties have already incurred substantial legal fees and their business has already been damaged. Even if rationality ultimately prevails and their attorneys are able to help them negotiate a business divorce, all sides will receive a share of a badly damaged carcass.

Business divorces involve a myriad of legal issues: Have the parties fulfilled their financial and fiduciary obligations to each other? Are there employment agreements that have continuing obligations, such as provisions against competitive employment and customer solicitation? What will happen to the employees of the business, especially when one business is being divided into two? Will the business, assuming it is going to continue, have to move to different premises? (This could be the case if the premises were leased or subleased from the divorcing parties.) What financial obligations are owed to the owner of the premises? Do the parties have a buyout agreement?

In negotiating the resolution of a dispute involving the owners of a small business, strong emotions can tremendously complicate the process. Emotional feelings can cloud the judgment of otherwise rational people who are in the midst of a conflict serious enough to make them want to terminate their business arrangement. The anger and resentment often associated with a business marriage that has gone sour can adversely affect the ability to make sound business decisions.