Buying out your business partner.

Perhaps you've been buddies since high school or college; or maybe mutual interests or kinship brought you together. Over the years you entered into a joint venture (whether as a partnership, an LLC or a corporation). But now, for whatever reason (a falling out, or simply to pursue different interests), you and your business partner have decided to part ways. You're buying him out, and he's moving on. What things do each of you need to consider?


1. Mutual Releases (both): If this is going to be a clean break, the both of you need to execute mutual releases releasing each other from any causes of action or claims you might have against the other. If this is an amicable split, it might not seem necessary, but if you're leaving not on the best of terms, this is an absolute must.

2. Release of Company Liabilities (Seller): If you're the one leaving the business venture, the business still might have some liabilities and debts, for which you are personally liable, such as bank loans which you were required to personally guarantee. Some lawyers simply have the buyer sign an indemnity for you, which simply means that he (the remaining partner) agrees to pay the loans, and to protect you from liability against them. The problem with this is that the bank is not bound by this agreement, and if your partner at some point is unable to make the payments, the bank can still come after you. Sure you've got a contract, but your ex-partner is now bust, so what good is that going to do? Instead, ensure that your break is a clean one by getting the bank to release you from your personal guarantees when you leave.

3. Proper Corporate Filings (Buyer): If you're buying out a fellow shareholder (corporation) or member (LLC), it is important to execute the proper corporate paperwork and filings. For example, if buying out a fellow shareholder in a closely-held corporation, you need to have prepared proper corporate minutes in which the stock certificates are conveyed, and in which the seller resigns from all corporate offices, directorships and registered agency, if applicable. If the seller is a member in an LLC, you must make sure that he resigns as manager and (if there is more than one remaining member of the LLC) that all members consent to the seller leaving and to the sale, if any, of his membership interest.

Buying out a fellow partner (or selling out, as the case may be) can be relatively straightforward, so long as the proper procedures are followed.

If you need further advice on dissolving a venture, or buying out a fellow partner, contact me at wldeaton@vnet.net .

Back after a hiatus

Though many things have been going on in the business of law, and the law of business, I've been on vacation and, when coming back, worked on this blog's sister blog: http://investtheworld.blogspot.com, for a detailed trip report and analysis of Antigua property.

While on holiday in the resort compound of Jolly Harbour Villas, I was surprised to find on site, in addition to two real estate companies and one rental management company, a U.K.-licensed attorney practicing on-site. I thought it brilliant, really. The villas cater to a primarily Brit crowd, number in the hundreds, and have for the past two years enjoyed a market upswing.

One of the real estate agents told me the attorney, though born in the U.K., had a lot of ties with his family to Antigua, and took over his uncle's practice.

It got me thinking, as I always do, about the idea of practicing overseas law. Why?

Well, for one thing, the idea of being in an exotic locale is fairly exciting to me, and better yet, a locale that is sunny and warm all the time.

For another thing, certain countries overseas, and the Caribbean in particular, contain strong privacy, corporate and asset protection laws. In this age, when our government believes it is entitled to full access to our privacy, and various greedy individuals target those whom they believe have more, the ideas embodied in these laws make make sense now more than ever.

I've thought about the idea of opening up an offshore office (either as a satellite or as my main branch), and the idea intrigues and excites me. I think putting myself there is the only way to really provide this service to clients. I know of another lawyer in the metropolitan area whom clients claim can do overseas transactional work. I also learned through a mutual client that he was interested in and/or owned property in a lot of the same areas I'm interested in (Belize, Panama, etc.).

When I talked to him, however, he seemed a bit vague, and the best I could take away from our conversation is that he's set himself up as a middle man between client and overseas counsel. I'm not sure that I personally would like that fit. Sure, I could help set clients up more easily than if they were trying to find an attorney on their own. But if a client is intelligent/savvy enough to want offshore services, could they not talk to an attorney without me?

Also, if the FBI came putting pressure to bear on the client and tried to invade his or her privacy, with an American attorney as a middle man, the government could get its hands on the lawyer, and perhaps threaten him until he talked.

From a more selfish vein, our government is so invasive and suspicious at this point, that if a client ended up doing something illegal offshore (for example, secreting income and not declaring it), the American lawyer could get caught up in that net, even though he might have known nothing about it and simply been a conduit or middle-man. Is that worth it?

By contrast, a lawyer practicing offshore would be a little more removed from our government's tentacles. His office, files and business transactions would take place off American soil, making it at least more difficult for our government's intrusions.

Does anybody know of an American-licensed lawyer who either jointly practices offshore or has moved offshore?