And You Thought Marriage Divorces Were Ugly, Try A Business Divorce


Co-owners of a medical practice can fight worse than an old married couple and if there is no way in the ownership documents to "break the tie" the results are usually a financial disaster. Some of the most contentious litigation occurs between two unhappy business partners. Whether the dispute is between deadlocked equal partners, or between minority and majority shareholders, a dispute over the practice's business affairs can lead to catastrophic consequences for the practice, it's employees and the owners. Ultimately, if the dispute cannot be resolved amicably the owners will need a divorce. As the old saying goes, the only ones that make money in a divorce are the lawyers.

Over the last couple of years, many physician practices have been breaking up due to disagreements in compensation and other fundamental management differences. Many times the medical practice involves two physicians who established the practice together at a time when both were excited about practicing medicine and optimistic about the future. The typical situation is one in which each physician owns one-half of the shares, each is appointed as a director, each has the same voting rights and both work for the practice. In this organization, if a dispute arises regarding the physicians' compensation or the management of the company and the dispute cannot be resolved amicably the company becomes deadlocked with no way to break the tie. Each owner has a right to vote his share and each is a director with the right to manage the practice.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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