Legal Question in Business Law in California

You should have an experienced business attorney review your corporate documents and the relevant provision of the corporate statutes on dissolution.

Did you have a Buy-Sell Agreement in place? Such an agreement is very effective (esp. for valuation purposes) when one Shareholder wishes to leave a corp.

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The other attorney is right on point here. A review of all facts, documents, etc. is required. After that, a personal consultation is needed. This is not a simple bulletin board type question. Hopefully, you have a Buy-Sell Agreement in place. Consult with a business attorney in your area for specifics.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

There are multiple ways to address this situation, including litigation (California law allows a shareholder to initiate a dissolution of a corporation or LLC). There are also many traps to avoid, which can be costly in the long run. Invest in an attorney to help you through this, it will save you money down the road.

If you two can't resolve it, with or without the assistance of an attorney mediating it, then you could file legal action to dissolve and divide the assets, or appraise them and offer sale to either of you. Depending upon your Bylaws and other corporate agreements, there may be other options. If serious about pursuing this, feel free to contact me.

All of the foregoing answers give good advice and I agree with them. I will try to be a little more specific.

First, there are two fundamentally different approaches available. If the company is not very big, and not very profitable, it may be better to pursue dissolution of both the corporation and the business. A sub-set of this would be to sell the business intact to a third party, so that the two of you get "cashed out" in a consensual transaction. The other approach is that one of you will buy out the other. If indeed you have a buy-sell agreement in place, this may go fairly easily, but there are always the issues of valuation of the 50% interest that changes hands, and usually coming up with the money (or credit) is going to be a problem.

Even without an agreement in place, maybe the two of you can negotiate a buy-out. One interesting concept is to agree that Owner X will name a price for 50% of the company, then Owner Y gets to say whether he is buying or selling at that price. Causes X (and Y also) to do some thinking about what's fair. Get it in writing beforehand, and have witnesses present when the price is named. Set a short deadline for Y to decide to buy or sell.

If dissolving the company is the chosen path, note Corporations Code (CC) provisions for deadlock. See CC section 308; also, involuntary dissolution, CC sections 1800 - 1809. Yes, you would qualify to initiate dissolution proceedings under either CC 1800(a)(1) or 1800(a)(2).