Running a business with a partner can be rewarding, but it can also lead to disputes when visions or goals no longer align. If you find yourself in a situation where continuing the partnership is no longer viable, it’s important to follow the proper legal steps to remove a business partner in New Jersey. Acting carefully and in accordance with state law can help protect your rights and the future of your business.

Review the Partnership Agreement

The first step is to review your partnership agreement or operating agreement. These documents typically outline procedures for removing a partner, including buyout terms, notice requirements, and dispute resolution methods. If the agreement specifies how to remove a partner, those procedures must be followed.

If no agreement exists, the New Jersey Uniform Partnership Act or the New Jersey Revised Uniform Limited Liability Company Act will govern the process, depending on your business structure.

Determine Legal Grounds for Removal

Common reasons for removing a business partner include:

• Breach of fiduciary duty (e.g., misuse of funds or self-dealing)
• Failure to fulfill obligations under the agreement
• Misconduct or actions harming the business
• Irreconcilable differences that make the partnership unworkable

Each situation requires evidence and a legal basis to justify removal, especially when the partner disagrees.

Follow Proper Legal Procedures

Depending on the business structure:

• LLCs: The operating agreement usually governs removal. If not, a court petition may be necessary.
• Partnerships: Without an agreement, partners can dissolve the partnership and form a new one without the departing member.
• Corporations: Shareholder or board votes may be required to remove a partner who is also an officer or director.

Before taking action, ensure that all procedures comply with your governing documents and New Jersey law to avoid potential lawsuits.

Protect Your Interests

During the removal process, document everything and consult with a business attorney. You’ll also need to determine how to handle ownership shares, profits, and responsibilities after the partner’s removal. A buyout agreement or dissolution filing may be necessary.

Get Professional Legal Guidance

Removing a partner is a complex legal and financial decision that can affect your business’s future. At Juan C. Velasco, Esq., we can provide legal assistance to the New Jersey public, helping business owners navigate partnership disputes and removals while protecting their rights and assets.