How To Get Your Name Off The Business

I picked up the phone. 

The woman on the other end was clearly stressed.  “They told me you could get my name off the business,” she said quietly.

She and her friend had opened a personal services business together and it wasn’t working out.  The friend never quit her day job, leaving my new client to manage the business and provide the services by herself.  Then the partner complained about how everything was done. 

It is sometimes not simple to “get your name off the business.” You can change the name of the company’s registered agent at the Secretary of State, and change the responsible party with the IRS. You an resign as an officer, manager or director.

But you still own an interest in the business, and could have some ongoing liability even if you are not actively participating.

Even if you just want to give your ownership interest in the company to your partner, they may not be willing to take it. You may need a majority of the owners to consent to dissolve the company.

Add some company debt and personal guaranties, and it's even harder.

Unless your business partner consents to accepting your share of the business interest, you still own an interest -- partnership interest, membership interest or shares, and would have ongoing potential liabilities for a business you are no longer actively managing. .

The best way to handle this situation is to think about it while forming the business.  The best practice is to sign an owner’s agreement ahead of time.  It could be called a partnership agreement, shareholders agreement, operating agreement or buy-sell agreement. 

In these documents, there will be a process for one owner to leave and to be bought out by the other owner.  It will list triggering events (such as deadlock, death, disability, incompetency, bankruptcy, etc.).  There will be a pricing mechanism and a timing mechanism. 

Without a written agreement among the owners, there are limited remedies in the statutes, and the company may end up judicially dissolved with the assets sold for pennies on the dollar.