Iowa Business Divorce
Unfortunately, like some marriages, the exciting and passionate fire that burns between business owners and drives them to come together to do amazing work is replaced by a dull flame, bickering, money problems, and a deep yearning to part ways – the business divorce. In Iowa, business owners in limited liability companies (LLCs), partnerships, and corporations often consider divorcing – booting a fellow owner or find themselves on the other end of an effort to remove them as an owner. As a result, it is often asked, how does Iowa law address business divorce?
This post identifies three (3) instances in which an Iowa court may divorce business owners by kicking out (i.e. expelling) an owner in an Iowa limited liability company. Iowa law expressly permits Iowa courts to legally separate business owners in Iowa limited liability companies under certain, specified circumstances, including the following:
1. If the member has engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, the company’s activities.
2. If the member has willfully or persistently committed, or is willfully and persistently coming, a material breach of the operating agreement or the person’s duties or obligations under Iowa Code Section 489.409 (read section 489.409 (standards of conduct for members and managers here).
3. If the member has engaged in, or is engaging in, conduct relating to he company’s activities which makes it not reasonably practicable to carry on the activities with the person as a member.
Iowa Code Section 498.602. The three (3) methods for divorcing business owners identified above do not serve as an exhaustive list of every method by which you may boot (or be booted) from an Iowa company, rather, they serve to highlight a few of the many scenarios for how business owners may be involuntarily expelled (i.e. divorced) from an Iowa company.
If you believe a member in your Iowa company is acting wrongfully or if you are being accused of acting wrongfully as identified above and are seeking guidance as to your rights and interests in the Iowa company – including whether you can expel another or be expelled from your business – you should consider contacting a licensed attorney that handles corporate disputes.
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