Practical Considerations for Drafting and Utilizing Deadlock Solutions for Non-Corporate Business Entities

Monday, January 1st, 2001 at 12:00 am by Jason M. Hoberman
Jason M. Hoberman, Practical Considerations for Drafting and Utilizing Deadlock Solutions for Non-Corporate Business Entities, 2001 Colum. Bus. L. Rev. 231

One of the most difficult realities which principals in a new business venture must accept is that their relationship may need to terminate prematurely due to disagreement. Accordingly, drafting workable provisions in anticipation of deadlock situations is essential to any complete operating agreement. This note will discuss the options available to the principals of a partnership, limited liability company (‘L.L.C.‘) or limited partnership (‘L.P. ‘) in drafting the deadlock solution, and the problems that will arise in its implementation. I do not suggest that one form of deadlock solution is superior to others in all cases. Principals should consider many factors such as timing, access to cash, and the nature of their business venture when choosing the deadlock solution. In many situations, however, one option will make more sense than others. In this note, I have attempted to highlight some of these cases and the preferred options that should be considered.

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