How to Divide Businesses Through Mediation
If you jointly own a business, you may find yourself having to divide the business if you have a dispute with the co-owners or want to cash in your share of the firm so that you can retire. Businesses are often divided by the courts if the owners cannot reach an amicable agreement. If you want to reduce your out-of-pocket expenses you should consider mediation. During the mediation process, a neutral third party helps you and the other owners to reach agreement on the division of the firm's assets.
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Instructions
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Draw up a list of the firm's assets and review the list with the other business owners. You may reach agreement on dividing up some of the firm's assets, in which case you can file quit-claim deeds or issue business checks to divide those assets among the owners. Having divided some of the assets, you should complete a new list that just includes the remaining assets.
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Suggest to your business partners that you should hire a mediator to oversee the division of the business. All parties must agree to the mediation process. To reach this agreement, point out the fact that you can all save money in terms of legal fees by mediating rather than going to court. Furthermore, it often takes less time to mediate an agreement than it takes to settle a court case. This means that you can all start focusing on your separate business entities within a short period of time.
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Contact a contract attorney in your state. You could ask your firm's lawyer to oversee the mediation process, but you may prefer to involve a completely neutral party so that the mediator has no preconceived ideas about the outcome of the mediation process. Ideally, you should hire a law firm that specializes in mediations because such firms have the necessary expertise to quickly and efficiently handle your dispute.
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Sign a mediation agreement. Ask the mediator to prepare a mediation agreement that includes the terms of the mediation process. Typically, participants must agree to keep details of the negotiations private. The agreement should also include details such as when the mediation sessions will occur and how you will split the mediator's fees.
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Enter into discussions with the mediator by making your demands for the assets and liabilities of the business that you wish to claim. Negotiate through the mediator with the other business partners. Make compromises as necessary to reach agreement on the division of the firm.
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Sign a formal settlement agreement. Once you resolve the dispute, the mediator can prepare a settlement contract that details the division of the firm's assets. Keep a copy of the document on file in case any other disputes arise further down the line.
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Tips & Warnings
You cannot settle a dispute unless one or more parties agree to compromise. However, as with any negotiation process, you should not make concessions at the very beginning of the process; if you do you may find yourself having to make even more concessions as negotiations progress.
Mediators cannot impose a verdict during a dispute. When you hire a mediator, you and your firm have to pay legal fees even though there are no guarantees of a resolution. If mediation fails, you and your business partners may have to go to court and pay another set of legal fees to have a judge make a firm ruling on the division of the business.
