It’s Over! – Or Is It? And Now What? – Business Disputes in Privately Held-Businesses

dissolution of businesses

The experienced business litigation attorneys at Rosenbaum & Taylor, P.C. represent all types of businesses, including privately held corporations, limited liability companies, partnerships and limited liability partnerships, and their owners, members and partners. They represent them in internal, and external business disputes, and in actions seeking to change the ownership, or management structure of the business or seeking to dissolve the business entity.

“Is it Really Over?”

Business owners, partners, and members disagree or even fight, for all kinds of reasons. Sometimes those disagreements, or fights, are fatal to the future of the business, but sometimes they do not have to be. Working with top business attorneys gives the parties to a business dispute the best chance to work out their differences and reach an agreement as to whether, and if so, how, the business will move forward. The business attorneys at Rosenbaum & Taylor, P.C. work to achieve the best results for their clients, in the most effective and efficient manner, using their experience, knowledge, and training to recognize all of the potential complexities of the dispute and to lead the clients through a difficult situation, to a positive resolution.

The business attorneys at Rosenbaum & Taylor have helped owners, members, and partners of all types of businesses address their internal business disputes. Whether by reorganizing the business, re-drafting the operating agreement or partnership agreement, acting as a mediator, or providing another type of assistance, the firm has helped businesses successfully, and productively, navigate the challenges presented by issues, or disputes, between the owners, members, or partners.

In privately-held businesses, the founders, owners, partners, and members often have strong personal connections to the business based on its history or its mission, based on the personal relationships involved, or for a variety of other reasons. Conflict arises in privately-held businesses on a wide range of issues, but since privately-held businesses are often started by family members, close friends or long-time colleagues, conflict frequently is personal and can be emotional. When there is an internal dispute, there is often more anger and emotion involved than occurs in public companies. When business litigation attorneys work with businesses to resolve their internal issues, or to prosecute, or defend, an action to dissolve the business, they must appreciate the unique issues at play inside the business and work with their clients to achieve the best result.

“Yes, it Really is Over.”

If the parties involved in the business have already determined, or come to determine, that the business should cease operating, the parties should consult an experienced business law firm to plan the next steps. It is not as simple as sending the employees home and locking the door.

Under New York law, the grounds on which the individual owners, members, or partners, of a privately held business entity, can seek to have a court dissolve the business depends on the corporate structure of the business.

Dissolving a Privately-Held Corporation in New York

Under New York law, a privately-held corporation can be dissolved voluntarily, or involuntarily.

Voluntary Dissolution

For the owners of a privately held corporation to dissolve the corporation voluntarily requires that the corporation first obtain the consent of the New York State Tax Department and then file paperwork with the New York Department of State, including a Certificate of Dissolution. There are additional requirements for corporations that have done business in New York City and incurred tax liability to the City of New York.

Involuntary Dissolution

In New York, the grounds for involuntary dissolution of a privately-held New York corporation include deadlock among shareholders and “special circumstances.” With respect to a deadlock among shareholders, an individual who holds at least fifty percent of the voting share of the corporation, or a group of individuals who collectively hold at least fifty percent of the voting shares of a New York corporation, may seek to have the corporation dissolved, involuntarily if they can demonstrate that: 1) the directors are so divided that they cannot get the votes required for the Board of Directors to take action or; 2) the shareholders are so divided that they cannot get the votes required for the election of a director or; 3) there is such internal conflict that that dissolution of the corporation would be to the benefit of the shareholders.

With respect to the grounds of special circumstances, an individual, or individuals holding at least twenty percent of the shares of a New York privately-held corporation, may seek a court-ordered dissolution by showing that: 1) the directors or those controlling the corporation have taken illegal, fraudulent or oppressive actions toward the shareholders seeking the dissolution or; 2) the assets of the corporation are being looted, wasted, or diverted for non-corporate purposes by its directors, officers or those in control of the corporation.

Dissolving a New York Partnership

A New York State Court will dissolve a New York partnership upon the application by, or on behalf of, a partner when that partner can demonstrate that one, or more, of the following situations, has occurred:

  • A partner has been declared incompetent in a court proceeding, or is shown not to be of sound mind;
  • A partner becomes incapable of performing in accordance with the partnership agreement;
  • A partner has undertaken something which negatively impacts upon the business of the partnership;
  • A partner willfully, or persistently breaches the partnership agreement, or otherwise behaves in a manner that makes it impracticable to carry on the business of the partnership with that partner’s involvement;
  • The business of the partnership can only be carried on at a loss; or
  • Other circumstances make a dissolution appropriate.

Dissolving a Limited Liability Company (LLC)

A New York State Court will dissolve a limited liability company at the request of a member, or a request made on a member’s behalf, when the member seeking the dissolution can demonstrate that: (1) the management of the LLC is unable, or unwilling, to promote the stated purpose of the LLC, as is set forth in the operating agreement; or (2) it is not financially possible to continue the business of the LLC.

Whether it is time for a business to find a way forward, or for those operating it to find a way to move on, Rosenbaum & Taylor, P.C. can help.

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