Ray Hrdlicka – Host – Attorneys.Media
“What are some of the common business disputes? Is it vendors…?”
Michael Campbell – Business Dispute Attorney – Pierce County, WA
“Yes, it’s usually over money. It’s usually over payment for goods, or some things like that. What I’ve frequently found, the business… it’s not technically business against business. It’s individuals within a business that may have disputes. So, for example, one question you had asked me earlier was, what happens if you’re in business with other people and you don’t get along?”
Ray Hrdlicka – Host – Attorneys.Media
“It’s a big issue because it’s like a marriage.”
Michael Campbell – Business Dispute Attorney – Pierce County, WA
“The same thing, is it the same thing as in the civil law? Yes, it’s a divorce. There might be times when you need to get divorced from your business partners. Then the question is, what kind of an association is it? Is it a partnership? Is it a limited partnership? Is it a limited liability company? Is it a corporation, or is it just a loose association of individuals who are really also proprietors? And depending on what the association is and what your contractual provisions are, that will determine how we get out of it.
And the first, the first level, is negotiation and mediation. You want to try and solve it without having to go to court, if you can. And then you look to the contract. And if you have contracts, and presumably you do with these other people, or there’s a section in your articles of formation of the business that says, here’s what you do in the case where you need to dissolve the company. Either… And so there will be a change in the articles of incorporation, or there will be a buyout by one party of another. And whether you’re the majority party or the minority party in this dispute, and sometimes they’re 50/50, either one could buy out the other.
But that’s usually the way these problems are solved. And in any case, most of the time, the articles of formation of the company will say that if you want somebody out, you have to buy them out, you have to give them fair market value. Or it will define a formula within the articles of formation that may not exactly comport with fair market value, but it defines exactly… exactly how you’re going to have a person, change their relationship to the business. It could be that you simply have a reduced share in the business, or you are out of the business.
I had one company, one time, where it was a limited liability company, and it was a small business, a tire and wheel shop. And one of the three partners really wasn’t doing as much work as the other two. He wasn’t pulling his weight. The other two desperately wanted him out, but they didn’t have any idea how to get him out. He was, technically, a partner. He had one third of the business, and that was defined in the articles of formation of the limited liability company. And it didn’t take long before I determined exactly what the value of the business was. They actually determined what the value was. They determined what his share was worth. And ultimately, I had the pleasure of offering him his share of the business. The third party who wasn’t pull on his weight and telling him he was out of the business.”
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