Partner & Shareholder Disputes
When co-owners disagree — from buyout negotiation to mediation to dissolution. Practical guidance for resolving business conflicts without destroying the company.
Tools & Resources
Partner Buyout Estimator
Model lump sum, installment, and earn-out with tax implications
GuideResolving a Partner Dispute: Every Option Explained
Mediation, buyout, dissolution, judicial options — complete guide
ComparisonMediation vs Arbitration vs Litigation
Cost, timeline, privacy, and outcome comparison
ChecklistPartnership Agreement Review Checklist
Is your agreement protecting you? Check these 30 items.
Key Terms to Understand
Enterprise Value (EV)
The total value of a business including equity and debt, minus cash. Used as the starting point for most business acquisitions because it reflects what a buyer actually pays to take control of the operating business, regardless of how it's financed.
Due Diligence
The investigation period after a letter of intent where the buyer verifies everything the seller claimed — financials, legal, operations, customers, employees, IP, environmental. Typically 60–90 days. Most deals that die, die here.
Earn-Out
A portion of the purchase price contingent on the business hitting performance targets after the sale. Common when buyer and seller disagree on value. The risk: sellers stay involved but lose control, and the buyer can manipulate results. Structure carefully or avoid entirely.
Goodwill
The portion of a purchase price that exceeds the fair market value of identifiable tangible and intangible assets. It represents brand reputation, customer relationships, workforce, and other value that can't be separated and sold independently. In an asset sale, goodwill is amortized over 15 years by the buyer.
Buy-Sell Agreement
A contract between business co-owners that governs what happens when an owner wants to leave, dies, becomes disabled, or gets divorced. Specifies how ownership interests are valued, who can buy them, and the terms of purchase. The single most important document for any multi-owner business, and the one most often missing or outdated.
Shotgun Clause (Russian Roulette Clause)
A buy-sell provision where one partner offers to buy the other out at a stated price, and the other partner must either accept the offer OR buy the first partner out at that same price. Forces fair pricing because the offeror doesn't know which side of the deal they'll end up on. Effective but brutal.
Right of First Refusal (ROFR)
A contractual right giving existing owners the opportunity to match any outside offer before an ownership interest can be sold to a third party. Standard in most operating agreements and partnership agreements. Without it, a partner could sell their share to anyone.
Fiduciary Duty
The legal obligation to act in the best interest of another party. Business partners owe each other fiduciary duties of loyalty, care, and good faith. Board members owe them to shareholders. Breach of fiduciary duty is the most common legal claim in partner disputes and the strongest one in court.
Judicial Dissolution
A court-ordered dissolution of a business entity. In California, available under Corp Code §1800 (corporations) or when an LLC's members are deadlocked. The nuclear option — expensive, slow, and destructive to value. Courts will sometimes order a buyout instead of dissolution.
Mediation
A voluntary, confidential dispute resolution process where a neutral third party helps the disputing parties reach their own agreement. Not binding until both sides sign. Costs $5K–$25K vs $50K–$500K+ for litigation. Preserves relationships and keeps disputes out of public court records.
Arbitration
A private dispute resolution process where a neutral arbitrator hears evidence and makes a binding decision. Faster than court (3–9 months vs 1–3 years) and usually confidential, but limited appeal rights. Many operating agreements require it.
Operating Agreement
The governing document for an LLC that defines ownership structure, member rights, management authority, profit distribution, and what happens when a member leaves, dies, or disputes arise. California doesn't require one, but operating without one means default state rules apply — and those defaults rarely match what the members actually want.
Non-Compete Agreement (California)
A contractual restriction preventing one party from competing with another after employment or sale. In California, non-compete agreements between employers and employees are generally void and unenforceable under Business & Professions Code §16600 — one of the strictest non-compete prohibitions in the country. The major exception: non-competes signed in connection with the sale of a business are enforceable for a reasonable geographic and time scope. This dramatically affects how California businesses are sold and how key employees can be retained.
Equity Value
The value of a company attributable to its equity holders, calculated as enterprise value minus net debt (debt minus cash). When a buyer 'pays $5M for the business' in a stock sale, that $5M is the equity value — the buyer also assumes any debt. In a typical purchase agreement, the headline price is enterprise value, but the cash actually received by sellers is equity value minus transaction costs and any holdbacks.
Dealing with partner disputes? Let's talk.
Dennis Duitch has guided hundreds of business owners through partner disputes situations across technology, entertainment, manufacturing, and professional services.
MBA, Northwestern University · CPA · Certified Business Appraiser · Mediator · 30+ years of practice