LONG ISLAND, New York. We often hear about business mergers, but more recently, corporate divorces have been making the news. E-Bay and PayPal offer an excellent case study of the benefits of corporate divorce. According to the New Yorker, over time, PayPal outgrew E-Bay. When PayPal was first purchased by E-Bay, the purchase gave PayPal the credibility it needed to grow and gain more users. Yet, as PayPal grew, its association with E-Bay limited the corporate partnerships it could make with E-bay’s competitors. When smaller companies outgrow their parent companies, it sometimes pays to split.
We often see business headlines announcing corporate mergers, but as these business grow (or outgrow the merger), we may come to see more corporate divorces in the future. Corporate divorces are sometimes necessary when mergers don’t work out. After all, not all mergers result in good outcomes. According to the Economist, corporate divorces, like marital divorces, can be costly. But, for family businesses or partnerships that would benefit from a split, it can be beneficial to hire a corporate divorce lawyer, like the attorneys at Solomon Richman, P.C. After all, companies undergoing divorce need to consider how payroll, benefits, and shareholders will be compensated during the split.
While larger tech corporate divorces make the news, smaller businesses may choose to undergo corporate divorce for a number of reasons. Business partnerships may find themselves struggling with irreconcilable differences about how to run a small business. When this happens, sometimes corporate divorce is the best option to allow each business partner to pursue goals. Business partners may wish to relocate to a new city and if the company cannot grow to accommodate the move, a split may be beneficial. If a family business grows and diversifies, families may split the business interests among children. In marital divorces where couples co-ran or co-founded a business, sometimes corporate divorce accompanies marital divorce.
Many legal considerations must be made when undergoing a corporate divorce. While smaller companies won’t have to make the same considerations that larger companies may have to make, companies must make sure that they fulfill their legal and business obligations before finalizing the divorce. In order to properly finalize a corporate divorce, owners should follow proper procedures. Companies must notify stakeholders, shareholders, employers, and state agencies in order to legally complete a corporate divorce. The kinds of notifications and steps you’ll need to take to complete a corporate divorce will depend largely on the structure of your company, the ownership, and how your business was formed.
When it comes to business planning and business law, it is best to be prepared. If you are considering restructuring or splitting up a business, it may be wise to speak to a business lawyer in Long Island. Solomon Richman, P.C. are qualified business lawyers who handle a range of business concerns, from corporate divorce to business sales and dispute resolution to commercial litigation. Visit us at http://solomonrichman.com/business-law/ to learn more.