Litigation + Corporate 8 min read

Your business partner wants out. Now what?

The five ways a Texas partnership dissolution can go — and what to do in the first 72 hours to protect your business, your money, and the relationship if it can be saved.

If you read nothing else

Your partner just told you they want out. You have 72 hours before the decisions you make start limiting your options. First: do not send the email you're composing in your head — anything you write now is discoverable later. Second: confirm your access to the company's financial records, bank accounts, and key contracts. Third: call an attorney who has handled this before. Not next week. Today.

The difference between a $30,000 negotiated buyout and a $200,000 lawsuit is almost always determined by what happens in the first three days.

Call Chuck Kraus: (682) 529-7177

I've been on both sides of this conversation. As general counsel, I've sat across from the CEO when a co-founder walked in and said "I'm done." As outside counsel, I've been the call at 9 PM from the business owner who just got the text. And in 25 years of corporate practice, I can tell you: the outcome depends less on the law and more on what happens in the first 72 hours.

Most business owners react emotionally. They make promises they can't keep, send messages they can't unsend, or freeze and do nothing while their partner makes moves. All three responses are wrong — and all three happen because the business owner doesn't know what they're actually facing.

So let me lay it out. There are five paths a partnership dissolution can take in Texas, and the one you end up on depends on two things: what's in your operating agreement, and how the two of you behave in the first few weeks.

The five paths

1
The negotiated buyout
Both sides agree on a price, a payment structure, and a transition plan. The departing partner sells their interest to the remaining partner (or back to the company). You draft a separation agreement, transfer the interest, update your governing documents, and move on. Total legal fees: $15,000–$40,000 for both sides. Timeline: 60–90 days. This is the outcome you want — and the one you're most likely to get if both sides have competent counsel early.
2
The buy-sell agreement triggers
If your operating agreement includes a buy-sell provision — and if it was drafted well — the departure triggers a predetermined process: a valuation mechanism, a purchase price formula, a payment timeline, and transfer procedures. You follow the document. The only question is whether the valuation is current. If the buy-sell was written ten years ago with a fixed price, it probably doesn't reflect today's value. But even an imperfect buy-sell is better than no buy-sell, because it provides a framework both sides agreed to when the relationship was still good.
3
Dissociation without dissolution
Under the Texas Business Organizations Code, a partner can dissociate — separate from the partnership — without forcing the business to dissolve. The remaining partner continues the business, and the departing partner is entitled to the fair value of their interest. This is the TBOC's default for partnerships without a buy-sell provision. The challenge: "fair value" is rarely something both sides agree on. You'll likely need a business valuation, and the methodology will be the first thing you fight about. Earnings-based? Asset-based? Market comparables? Each produces a different number, sometimes dramatically different.
4
Judicial dissolution
When the partners are deadlocked, the relationship has broken down, or it's no longer "reasonably practicable" to carry on the business (TBOC §11.314), either partner can petition a Texas court to dissolve the company. The court appoints a receiver, the business is wound down or sold, and the proceeds are distributed. This is the nuclear option — and it's expensive, slow, and destructive to business value. But for some partners, it's the only leverage they have. Courts don't grant dissolution lightly, but the threat of it changes the negotiation dynamics significantly.
5
Fiduciary duty litigation
This is what happens when the dissolution goes wrong. One partner diverts business, self-deals, competes with the company, withholds financial information, or takes actions designed to squeeze the other partner out. Texas courts take fiduciary duty violations seriously — especially since SB 29 codified the business judgment rule in 2025, which clarified what protects directors and what exposes them. Fiduciary duty claims can convert a $50,000 buyout into a $500,000 lawsuit. This is the most expensive path, and it's almost always preventable if both sides have counsel from the beginning.

What determines which path you're on

Three factors. The first is your operating agreement. If it has a well-drafted buy-sell provision with a clear valuation mechanism, you're probably on Path 1 or 2. If it's silent on buyouts, or if you don't have an operating agreement at all, you're headed for Path 3 or 4 by default.

The second factor is the relationship. If both partners can still be in the same room, speak respectfully, and acknowledge that the other person has legitimate interests — you can negotiate. If the relationship has deteriorated to the point where every communication is adversarial, you're closer to Path 4 or 5.

The third factor — and the one most people overlook — is behavior. What you do in the first two weeks after the conversation sets the trajectory for everything that follows. I've seen partners who were headed for Path 1 end up on Path 5 because one of them did something impulsive that breached their fiduciary duties. I've also seen partners who seemed destined for litigation find their way to a negotiated resolution because both sides got competent counsel early and the attorneys kept the temperature down.

The difference between Path 1 and Path 5 is rarely about the law. It's about behavior.

What to do right now

If your partner has told you they want out — or if you're the one who wants to leave — here's what I tell every client in your position:

In the first 24 hours

Do not communicate in writing. No emails, no texts, no Slack messages. Anything you write is discoverable in litigation. If you need to respond, say "I hear you, let's talk about this in person this week" — and nothing more.

Secure your access. Confirm that you can still log into every bank account, accounting system, CRM, and file storage system the business uses. Don't take anything. Don't change any passwords. Just verify that you can see what you need to see. If your partner has sole access to the financials, that becomes a problem very quickly.

Locate your governing documents. Find the operating agreement, the original formation documents, any amendments, any buy-sell agreement, any side letters. Read them tonight. Look specifically for: buyout provisions, valuation mechanisms, dispute resolution clauses, and any restrictions on transfer.

In the first week

Call an attorney. Not your family lawyer, not your real estate closer — an attorney who has handled partnership dissolutions in Texas. The first conversation should tell you which of the five paths you're on and what your realistic options look like. This call typically takes 30 minutes and will save you months of uncertainty.

Do not negotiate terms. I know this is counterintuitive. Your instinct is to sit down with your partner and work out a deal. But until you understand your legal position — what the operating agreement requires, what your partner is entitled to, what the business is worth, and what your rights are if the negotiation fails — you cannot negotiate effectively. The worst time to learn that you gave away too much is after you've already shaken hands.

In the first 30 days

Get a business valuation. Whether you're buying or selling, you need to know what the business is worth. This isn't a back-of-the-napkin exercise — it's a formal valuation by a certified appraiser who understands Texas law. The valuation will be the foundation of every conversation that follows, so invest in getting it right.

Engage in structured negotiation. With counsel on both sides and a valuation in hand, you can have a productive conversation about terms. The discussion should cover: purchase price, payment structure (lump sum vs. installment), transition timeline, restrictive covenants (non-compete, non-solicit), customer and employee communications, and any ongoing obligations (guarantees, leases, loans).

How I help

This is what I do.

I've structured buy-sell agreements, negotiated partnership buyouts, and advised boards through ownership transitions at three different companies. If the dissolution is a negotiation, I handle it directly. If it becomes a dispute, I bring in Scale LLP's litigation team — including attorneys who have handled partnership dissolutions, fiduciary duty claims, and commercial litigation in Texas state and federal courts.

Either way, one call starts the process. You'll talk to me directly. No intake form, no associate, no hold music. Just a 15-minute conversation about your situation — and a clear picture of which path you're on.

Schedule a Call

Going deeper

Questions I hear from business owners in this situation.

Three things, in this order. First, do not send the email you're composing in your head — anything you write now is discoverable later. Second, secure your access to the company's financial records, bank accounts, and key contracts — not to take them, but to ensure you can still see them. Third, call an attorney who has handled partnership dissolutions before. The first conversation will tell you which of the five paths you're actually on, and that changes everything about what you do next.

Without a buy-sell agreement, you're governed by the default provisions of the Texas Business Organizations Code. For partnerships, this means either partner can dissociate — but dissociation doesn't automatically mean dissolution. The remaining partner may continue the business, but they'll owe the departing partner the fair value of their interest. Without an agreement that defines "fair value," you'll likely disagree about what the business is worth, and that disagreement often becomes litigation. If you don't have a buy-sell agreement, the single best thing you can do right now is get one drafted before the relationship deteriorates further.

If your buy-sell agreement specifies a valuation method, that method controls — whether it's a formula, a fixed price, an agreed-upon appraiser, or a process for selecting one. If there's no agreement or no valuation method, the TBOC requires payment of the "fair value" of the departing partner's interest. Fair value typically means the value of the interest as a going concern, not a liquidation value. In practice, this usually requires a formal business valuation — and the two sides will almost certainly disagree about the appropriate methodology. Having a valuation mechanism in your operating agreement before a dispute arises eliminates the single most expensive variable in a partnership dissolution.

It depends on your entity type and governing documents. In a Texas LLC, a member can petition a court for judicial dissolution under TBOC §11.314 if it's "not reasonably practicable to carry on the entity's business in conformity with its governing documents." Courts have interpreted this to mean situations where the members are deadlocked, the company's purpose can no longer be achieved, or the relationship has deteriorated to the point where the business can't function. A partner can't simply force a sale because they want out — but they can create enough legal and operational pressure to make dissolution the practical outcome if the remaining partner doesn't offer a reasonable buyout.

In Texas, partners owe each other fiduciary duties of loyalty and care. The duty of loyalty means you can't compete with the partnership, divert business opportunities, or engage in self-dealing transactions without disclosure and consent. The duty of care means you must act with the care an ordinarily prudent person in a similar position would exercise. These duties don't end the moment one partner announces they want to leave — they continue until the dissolution is complete. Violations during a dissolution can convert what would have been a $50,000 buyout negotiation into a $500,000 lawsuit.

You should absolutely talk to your partner — but talk to an attorney first. Not because you need to be adversarial, but because you need to understand your legal position before you negotiate. Most business owners make commitments in the first conversation that limit their options later. "Let's just split everything 50/50" sounds reasonable until you realize the business has $200,000 in receivables, a lease obligation, pending contracts, and equipment that one partner uses daily. An attorney who has handled these situations will help you understand what a fair resolution actually looks like before you start negotiating one.

The range is enormous, and it depends almost entirely on whether the partners can agree on terms. A negotiated buyout with competent counsel on both sides typically runs $15,000 to $40,000 in total legal fees. A litigated dissolution — with discovery, depositions, valuation disputes, and possibly a trial — can exceed $200,000 per side and take 18 to 24 months. The single biggest determinant of cost is how early the partners engage counsel. The earlier both sides have competent legal advice, the more likely the resolution stays in the negotiated range.

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The sooner you call,
the more options you have.

Partnership dissolutions get simpler when both sides have counsel early. One call to Chuck starts the process.

Schedule a Call (682) 529-7177

This article provides general information about Texas partnership law and is not legal advice for your specific situation. Every partnership dissolution involves unique facts, governing documents, and circumstances. If you're facing a partnership dispute, consult an attorney licensed in your jurisdiction before taking action. Chuck Kraus is licensed in Texas, Minnesota, Washington State, and Canada.