When Founders Turn Foes: Breaking Up a Business in New York

When you launched your business, you probably didn’t imagine ending up on opposite sides of the table. But partnerships don’t always last. Tensions build, trust fades, and suddenly, you're facing a split. It’s personal. It’s frustrating. And it’s legally messy, especially in New York. If you're caught in a situation where the business you built is falling apart, you need answers fast. This is where our experienced commercial litigation attorneys can make all the difference.

At Horn Wright, LLP, our attorneys know how complicated business breakups can get. We help partners, shareholders, and corporate officers protect their stake and avoid unnecessary fallout. Whether you’re fighting for control or trying to exit cleanly, we’ve got the tools to get you through it. We represent business owners across New York who are dealing with corporate dissolution, internal disputes, and deadlocks.

Your Rights as a Shareholder When It All Falls Apart

When things go south, emotions usually run high. But your rights as a shareholder don’t disappear just because relationships get strained. Whether you’re a majority stakeholder trying to dissolve a company or a minority shareholder trying not to get squeezed out, New York law offers several protections.

You have the right to:

• Inspect financial records and business books under NY Business Corporation Law §624
• Participate in major corporate decisions, including dissolution votes
• Receive fair value for your shares if a buyout or dissolution occurs

These protections are especially important in privately held companies where transparency might suddenly vanish the moment conflict begins.

What Majority and Minority Shareholders Can Expect

In a perfect world, majority and minority shareholders would work through disagreements fairly. In the real world? It often gets ugly.

Majority shareholders typically have the power to initiate decisions like selling off assets or voting to dissolve the corporation. But that power comes with limitations. You can’t just freeze out minority shareholders or deprive them of their fair share. Courts in New York frown heavily on oppressive tactics.

Minority shareholders, meanwhile, often feel cornered. If you're in this position, don’t assume you’re powerless. You can petition the court under BCL §1104-a to dissolve the company if majority actions are oppressive or harmful to your interests.

Enforcing Buy-Sell Agreements in NY Corporations

If your corporation has a buy-sell agreement, now’s the time it earns its keep. These agreements usually lay out:

• Who can buy a departing owner's shares
• How those shares are valued
• Whether certain events (like deadlock or death) trigger a buyout

But here’s the thing—buy-sell agreements are only useful if they’re legally enforceable. Courts in New York will uphold them if they’re clear, signed, and followed by all parties. If one side tries to dodge it, you'll need commercial litigation attorneys to help push it through.

How to Legally Shut Down a Corporation in New York

If all options have been exhausted and you're ready to end it, there's a process. Shutting down a business isn’t as easy as walking away—it’s a legal procedure that needs to be followed carefully to avoid long-term fallout.

Internal Approvals and Votes

First, you’ll need a formal vote. New York law requires:

• Majority shareholder approval unless your corporate bylaws say otherwise
• A board resolution to recommend dissolution
• An official shareholder meeting to finalize the vote

Skipping this step could open you up to legal trouble later, especially if not all shareholders are on board.

State Filings and IRS Notifications

Once you’ve got internal approval, you’ll need to make it official with the state and federal government:

• File a Certificate of Dissolution with the NY Department of State
• Notify the IRS and settle any outstanding tax obligations
• Cancel any permits, licenses, and business registrations

You’ll also want to wind down financial activity—settle debts, collect receivables, and distribute any remaining assets. Any missteps here could land you in court down the line.

The Brutal Reality of Minority Shareholder Battles in NY

Being a minority shareholder during a business breakup is rough. You might feel like you're being pushed out or ignored. Worse, you could be shut out of key decisions that directly impact your investment.

We’ve seen some tough scenarios play out in cities like Albany and Buffalo, where minority shareholders were left in the dark as companies dissolved without proper buyouts. Don’t let that happen to you.

If you believe the majority is acting unfairly, you have options:

• File for judicial dissolution under BCL §1104-a
• Demand a fair market valuation of your shares
• Sue for breach of fiduciary duty or shareholder oppression

Having commercial litigation attorneys by your side can help level the playing field and protect what’s rightfully yours.

What Can Go Wrong? The Fallout from a Bad Corporate Dissolution

Breaking up a business isn’t just about walking away. If things aren’t handled properly, the fallout can follow you for years. You might think you’re done—until the IRS comes knocking or a former partner sues you out of nowhere.

Potential Personal Liability

In some cases, shareholders or officers could face personal liability if they:

• Fail to pay taxes before dissolution
• Don’t notify creditors or settle outstanding debts
• Transfer or hide assets unfairly

Courts in New York are quick to hold individuals accountable when proper steps aren’t taken. Just because the business entity is gone doesn’t mean your liability disappears.

Tax and Creditor Consequences

Dissolution doesn’t erase tax obligations. In fact, it can trigger some serious consequences:

• Unpaid corporate taxes become your problem fast
• You could be personally responsible for sales tax or employment tax
• Creditors may still sue if they weren’t properly informed

This is where smart planning matters. A smooth exit isn’t just about signing the right papers—it’s about closing every legal and financial loop.

Time to Move On—with the Right Legal Backing

Breaking up a business is one of the hardest things you'll ever face as an owner or shareholder. You're parting ways with a dream, a partner, maybe even a big chunk of your future. But you're not alone in it. At Horn Wright, LLP, our commercial litigation attorneys help clients across New York handle these breakups with strategy, strength, and empathy. If you’re ready to protect your interests and move forward, it’s time to hire one of the best law firms in America.