Of the partnership disputes I see, the 50/50 ones are the hardest. Not because the law is more complicated, but because there is no majority to break a tie. Every decision needs the other person’s agreement, and the moment they decide to stop agreeing, the business can’t function. There’s no shareholder vote that resolves it and there’s no managing member who gets the last word. There’s just you, your partner, and nothing in the structure to break the tie.
Clients usually arrive in one of two states. The first is angry: my partner is wrecking the business and I want them out. The second is resigned: my partner has checked out, I’m doing all the work, and I want to keep the company without them. Either way, the practical question is the same. How do you actually end this?
There is no single answer, because the right move depends on the form of your business, what your agreement says, and what your partner is likely to do. But there are a handful of paths, and most 50/50 splits go down one of them.
Read your agreement before you do anything
If you have an operating agreement, shareholders’ agreement, or partnership agreement, the first move is to read it carefully, especially the parts about buy-sell, valuation, exit, and dispute resolution.
Some agreements have a buy-sell clause that handles this deadlock situation. One common version is the so-called shotgun clause where one partner names a price, and the other can either buy at that price or sell at that price. It forces honest valuation because the person naming the number has to be willing to take either side of the deal.
Other agreements may include mandatory mediation or arbitration provisions that push the dispute out of court for months before litigation is permitted. Some have valuation formulas that lock in a price for any departing partner’s interest. Some have non-compete provisions that limit what either of you can do after a split.
None of these provisions are universal, but if any of them exist in your agreement, they change the path forward. Read it before you talk to your partner. Read it before you talk to a lawyer if you can. The agreement may have already decided most of the questions you think you’re still asking.
The negotiated buyout: the option most cases end with
Most 50/50 splits, even the bitter ones, end with a negotiated buyout. One partner takes the business, the other takes cash or a promissory note paid out over time, and the parties go their separate ways.
This is usually the fastest, cleanest path when both sides accept that the partnership is over. The hard part is almost never the structure. It’s the number. What is the business actually worth, and what share does each partner deserve?
If you and your partner can agree on a valuation, the rest is just paperwork. If you can’t, you could hire a neutral business appraiser and agree in advance to be bound by the result or use a formula in your agreement if one exists; or use the threat or reality of a court proceeding to move things along. That proceeding might be a dissolution petition, which puts the other side on notice that a judge could order the business sold and the proceeds split. It might be a breach of fiduciary duty claim, which threatens your partner personally with damages for what they’ve taken or done. Neither needs to be a bluff. A books and records demand is sometimes useful here too in order to get the financial picture clear before settling on a number.
If negotiation isn’t working: judicial dissolution
When negotiation fails or your partner refuses to engage, New York courts can step in and end the business. The mechanism depends on the form of the company.
For closely held corporations, a 50% shareholder can petition for judicial dissolution under Section 1104 of the Business Corporation Law on grounds of deadlock. The standard is that the shareholders are so divided that the business can’t be run productively. Pure 50/50 deadlock with no tie-breaker fits that standard squarely. The court can dissolve the corporation, which forces the business to be sold or wound down with the proceeds split.
For LLCs, the path is judicial dissolution under Section 702 of the LLC Law. The standard is whether it is “not reasonably practicable” to continue the business in conformity with the operating agreement. New York courts read that standard narrowly, and pure deadlock alone may or may not be enough. When deadlock prevents the business from achieving its stated purpose, courts have ordered dissolution; but the outcome is not automatic and the facts matter.
In both cases, the dissolution petition is rarely the actual outcome. It’s leverage. Once one partner files and the other realizes the business may be sold and the proceeds split, the parties usually negotiate a buyout to avoid a forced sale. Many dissolution cases I file settle within months, often before the court rules on the petition.
The equitable buyout: a remedy that exists but is hard to count on
In some LLC dissolution cases, courts have granted what is sometimes called an “equitable buyout”: instead of dissolving the business, the court allows one member to buy out the other at a fair value determined by the court, and the LLC continues.
This sounds like exactly what most clients want when they file for dissolution. They don’t want the business to disappear. They want their partner gone. The equitable buyout achieves that without a forced sale.
But an equitable buyout is not an easy remedy to get. There is no statute in New York that expressly authorizes an equitable buyout in LLC dissolution proceedings the way BCL §1118 does for corporations. Courts have sometimes granted it as a matter of equity, but the case law is uneven and the outcome is unpredictable. You cannot file for dissolution and count on getting a buyout instead. It is a possible outcome, not a reliable one, and it is not something to build your strategy around.
If preserving the business is important to you, the better path is almost always a negotiated buyout before litigation reaches that stage, not a bet on the court’s equitable discretion.
What you can’t do (or shouldn’t)
Some moves that feel intuitive when you’re fed up with your partner are legally dangerous and usually counterproductive.
You can’t lock your partner out of the business or change the bank account passwords. A 50/50 partner has equal rights to the business and its accounts. Locking them out is a breach of your fiduciary duty, and they can go to court fast, and win, to be restored to their position.
You can’t take money out of the business to compensate yourself for what you think your partner owes you. Even if you’re right that they’ve been shortchanging you, self-help with company funds becomes a counterclaim against you for conversion or breach of fiduciary duty. It hands your partner ammunition.
You can’t expel your partner unless the operating agreement or shareholders’ agreement specifically allows it. New York does not recognize an inherent right to remove a 50% co-owner.
And while there is a procedure called a freeze-out merger that lets majority members force a minority member out of an LLC, it requires a majority. A 50% member cannot freeze out a 50% member. Both partners would need to agree to the merger, which defeats the purpose.
Where this usually lands
In my experience, the typical 50/50 split runs something like this. One partner reaches the end of their patience and talks to a lawyer. The lawyer sends a carefully drafted demand letter laying out the case for separation and proposing a process. The other partner gets their own lawyer. There are a few rounds of negotiation, sometimes with a books-and-records demand or a preliminary dissolution filing to put pressure on the timeline. Within a few months, the parties reach a buyout. One takes the business. The other takes cash.
Some cases don’t resolve that cleanly and run on for a year or more. Most do. The ones that don’t usually have something specific going wrong: hidden assets, allegations of fraud, a partner who refuses to negotiate at all. Those cases need real litigation. But pure 50/50 deadlock between two people who are willing to do the math is one of the more tractable dispute types, precisely because the absence of a tie-breaker forces the issue. Neither side can run out the clock indefinitely when the business is gridlocked.
What I’d do if you’re in this situation
- Read your agreement. The buy-sell, valuation, and dispute resolution provisions may have already decided how this ends.
- Preserve everything. Emails, texts, bank records, tax returns. Back them up somewhere your partner can’t reach. Don’t delete anything.
- Talk to a lawyer before you talk to your partner about the split. The first conversation you have with your partner about ending the business will set the tone for everything that follows, and what you say or commit to in that conversation can quietly limit your options.
The fuller context for this is on my partnership disputes page, which covers what to do and not do in the first thirty days, your rights under New York law, and what working with me looks like.
If you want to talk it through, call 212-253-1027 or email imke.ratschko@ratschko.com. The initial consultation is free.
