What Is Business Divorce?
When we think of the word ‘divorce’ oftentimes we attribute it to a married couple separating and dividing their assets. These situations can be amicable when both parties agree it would be best to end the relationship, or they can be prolonged battles over finances and sometimes child custody.
When business partnerships dissolve the process is sometimes referred to as a divorce, as well. This is because, much like the fallout of a marriage, the breakup of a business entity involves the splitting of shared finances, vendors, staff, and partners. When this unfortunate situation occurs it’s important to know the proper steps to take to ensure a business divorce can end successfully for all parties involved.
Splitting the Business
In any kind of professional relationship things can potentially go sideways or partners may simply drift apart over the years. Perhaps a partner’s interest has wandered into a different industry, or maybe you would like to work in a smaller environment. Whatever the situation may be, having a clear plan in place is absolutely essential.
When a new business entity is formed, one of the first steps that should be taken is vesting. Vesting is essentially the “prenuptial” phase where assets on either side are accounted for and contracts are drafted. These can include language regarding specific protocols and processes, what physical assets belong to whom, and financial obligations and expectations. In doing this you ultimately protect yourself and your assets from the very beginning should the business go awry down the line. These documents should be regularly reviewed and updated as needed to account for changes in the business or partnership.
When the decision comes to dissolve a business partnership, the business divorce should allow for the company to continue running smoothly without impacting clients, stakeholders, vendors, and staff. If all parties can walk away happy and keep the business running, then a separation is as smooth as it’s going to get.
Terminating an Entity in Texas
While you may think terminating a business partnership is a straightforward process, each state has their own guidelines for what needs to be done to dissolve the company.
In Texas specifically, the business will need to undergo the necessary internal steps to wind down any ongoing affairs. Consulting the entity’s governing documents, applicable Texas laws, and securing legal counsel are all great ways to accomplish this. Once these affairs have been wrapped up, you will need to submit two signed copies of a certificate of termination that meet statutory requirements. Once completed, a Certificate of Account Status will need to be attached to the signed documents for Dissolution/Termination issued by the Texas Comptroller and submitted along with the filling fee.
Whether your business is a for-profit professional corporation or a nonprofit organization, Texas law has many different requirements for completing this process. While many of the steps remain the same, some businesses may require additional documentation before a business divorce can occur.
Houston Business Litigation Attorneys
Splitting or dissolving a business between partners can be a difficult and oftentimes taxing process on those involved. The experienced business attorneys at Adair Myers Graves Stevenson can offer you the proper legal counsel needed to protect your entity’s best interests. Contact us today to see how we can help you feel confident about making the right decisions for your business.