Can Your Business Partner Sell Without Your Consent?

by Sophia Harrison; Updated September 26, 2017
Many businesses are run by partners.

Starting a business with another person inherently requires a certain level of trust and commitment. Business partners often are required to put personal differences aside to work in the best interest of the company. Sometimes, however, these differences cannot be overcome. If one person decides that he wants to sell or get out of the business, several factors need to be considered.

Location

Your partner's ability to sell the company without your permission could depend on where your corporation is registered. In certain states, a shareholder or partner with a 50 percent interest in the company can legally dissolve a corporation. Other states, however, require a partner to have a majority stake in the company. If you and your business partner have a 50-50 share in the company, neither can sell the company without consent from the other partner.

Involuntary Dissolution

When a corporation is distributed equally between two business partners who cannot come to an agreement, the party that wants to sell may seek legal recourse. Should a court agree that the two parties are incapable of reaching an agreement, the court could decide to uphold the petition for "involuntary dissolution." If this occurs, the company ceases to exist and all assets are liquidated and distributed evenly between the two partners.

Buyout Agreement

If your business is a limited liability company or general partnership, your partner can't sell the company without your consent. He may, however, sell his interest in the company if you don't have a buy-sell agreement. This agreement, which is usually created when a business is formed, is a binding contract between co-owners that specifies when a co-owner can sell his interest, who can buy it and at what price it should be sold.

Negotiation

Preserving the operations of your business should be your primary concern. Therefore, the best thing you can do is sit down with your business partner and have an earnest discussion about why he wants to sell the business. Your partner might not want to sell for the reason you think. Likewise, in many cases, your partner might be willing to sell you his interest in exchange for being released from further obligation to the business.

About the Author

Sophia Harrison began writing professionally in 2007. She has a Master of Arts in economics from the University at Buffalo-SUNY, as well as experience working in the New York City financial industry.

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