Can I legally force out a business partner who is ruining the company?

Three owners hold a Carmel IT managed-services company with 40 employees, and two of them own 60% between them. The third, who holds the remaining 40%, has stopped attending client meetings, charged personal expenses to the company card, and told a longtime customer that the business is failing. The majority owners want to know whether they can vote to force out a business partner whose conduct is damaging the company. The answer depends on the governing documents, and acting before reviewing them can expose the majority to claims of its own.

A majority vote can often change who manages the company or who is employed by it. Changing who owns it is a different matter. The steps the majority takes along the way can also shape whether a court later views the majority as the injured party or as the aggressor.

How do I remove a business partner from an LLC in Indiana?

Start by reading your operating agreement closely. If it provides for expulsion, a mandatory buyout, or removal from management, follow its procedures to the letter, including any notice and cure periods. If it doesn't, the options generally narrow to a negotiated buyout, a lawsuit over the partner's misconduct, or a petition asking a court to dissolve the company.

Indiana courts hold parties to the terms of these agreements. At the preliminary injunction stage, the Indiana Supreme Court affirmed an order blocking a 65% LLC member from removing the minority member as manager, because the conduct the majority relied on did not require its approval under the parties' agreements. The Indiana Court of Appeals, applying a law firm's partnership agreement, upheld an expulsion carried out by the two-thirds vote the agreement required, and it recognized that an expulsion made in bad faith or for a predatory purpose would breach the agreement and support a claim for damages.

Why isn't a majority vote enough to push a partner out?

Management and ownership are separate, so a majority vote may strip a partner of decision-making authority or end his employment (subject to any employment contract) without affecting his ownership interest. Unless an operating agreement, shareholder agreement, or buy-sell agreement gives the company or the other owners the right to buy him out on a triggering event, he remains an owner entitled to share in any distributions and to the protections Indiana law gives owners. For the Carmel company, the 60% majority may be able to remove the absent owner from management and address his expense charges, but taking his 40% interest would require authority in the documents.

In a closely held corporation, Indiana courts treat shareholders as owing each other duties similar to those partners owe. The Indiana Supreme Court affirmed a court-ordered buyout and punitive damages against a majority owner who changed the locks on a minority shareholder's office, ended his employment and distributions, and pressured other shareholders to sell. Removing a partner from management because he is mishandling accounts is a business decision; doing so as one step in a plan to squeeze him out cheaply is conduct that has produced liability. Each step should rest on a legitimate business reason that is documented when the step is taken, not reconstructed later.

What if your partner is taking money or customers?

A partner's misconduct can give the company and the other owners claims of their own. Unauthorized personal use of company funds, diverting customers or jobs to another business, and steering company opportunities elsewhere can support claims for breach of fiduciary duty. Where the conduct amounts to theft or conversion, an Indiana statute may allow a civil recovery of up to three times the actual damages plus reasonable attorney fees.

Before characterizing expenses as theft, the majority should find out how the company and its CPA have historically handled owners' personal charges. Some closely held companies book those charges as draws or distributions, and a practice the other owners tolerated or shared in can undercut the claim. Accusations made to employees or customers before the facts are established can also create liability of their own.

The first step is preserving bank statements, card records, emails, and customer communications. Any change to the partner's access to accounts or systems should be made through the authority the governing documents provide. Moving the business to a new company is especially risky, and in a 2026 Indiana Court of Appeals decision involving two development company co-founders, the trial court rejected one founder's plan to do so as inequitable because it would have recreated the business without the other founder.

When is dissolution the only way out?

In a 50/50 company there is no majority to vote anyone out, and without a buy-sell agreement the choices narrow quickly. Either owner can petition an Indiana court to dissolve the company, but the court can grant that request only if the owner proves the statutory conditions, which differ for corporations and LLCs. The related post on how Indiana courts handle deadlocked companies explains those standards.

Dissolution leaves the owners little control over timing, price, or who ends up with the customers. Once a court decrees it, the business exists only to wind up, and the court can appoint a receiver or custodian for a corporation or, in an LLC, conduct the winding up at a member's request when a member or manager has engaged in wrongful conduct or other cause is shown. In one case, an Indiana trial court appointed a custodian over a company while a co-owner's counterclaim for dissolution was pending, and the Court of Appeals affirmed.

When should you call a lawyer before you try to force out a business partner?

The appropriate time to consult counsel is before the first vote or the first change to a partner's access, because those early steps frame the dispute. A lawyer can review your agreements for removal or buyout rights, identify the notice and cure requirements that must be followed, and evaluate claims arising from your partner's conduct. Call promptly if any of these apply:

•        You are planning a vote to remove a partner as manager, officer, or director.

•        You have found unexplained transfers, personal charges, or missing funds.

•        Your partner is soliciting customers or employees or has started a competing business.

•        Your partner has threatened to sue, demanded a buyout, or mentioned dissolution.

Disputes among co-owners in central Indiana may be heard in the commercial courts in Hamilton and Marion counties, which were established for business and commercial disputes. Planning for litigation from the start helps you build the right record, even if the matter ultimately resolves through a negotiated buyout. If you are on the other side of this problem, the related post on being forced out of your own business covers the minority owner's options.

Frequently asked questions about how to force out a business partner.

Can you kick out a 50/50 partner?

Not by vote, because neither owner has a majority. A 50/50 partner can generally be removed only through a right in your agreements, such as a buy-sell or expulsion provision, through a negotiated buyout, or as the result of a court case. Claims based on the partner's misconduct can give you leverage, and if the company can no longer function, a petition for dissolution may be the remaining option.

Can I remove a member from an LLC without an operating agreement?

Without a written operating agreement, there is likely no enforceable expulsion right to rely on, which usually leaves a negotiated buyout, claims based on the member's misconduct, or a petition for dissolution. There is also a threshold question, because the Indiana Supreme Court held in 2025 that LLC membership requires a written operating agreement or the written consent of all members. Depending on the paperwork, the person you consider a partner may not legally be a member, although that person could still have a contract claim.

What can I do if my business partner is stealing from the company?

Preserve the evidence first, including bank statements, card records, invoices, and emails, and find out how the company has historically treated owners' personal expenses. The company and the other owners may have claims for breach of fiduciary duty, and theft or conversion may support a claim for up to three times the actual damages plus reasonable attorney fees. A lawyer can also evaluate whether to ask a court for an injunction or for court supervision of the company's finances while the case is pending.

Can I buy out my business partner against their will?

Only if your agreements create that right or a court orders a sale. Buy-sell provisions triggered by events such as death, disability, departure, or breach can give the company or the remaining owners a right to purchase, and the Indiana Court of Appeals has affirmed an order of specific performance enforcing a stock repurchase agreement. Without such a right, a buyout requires the other owner's agreement.

Can I lock my partner out of the business?

Locking out a co-owner is risky, even when you believe the partner is the problem. In an Indiana Supreme Court decision, a majority owner's decision to change the locks on a minority shareholder's office was part of the conduct that supported liability for breach of fiduciary duty. If you need to protect company assets or information, make changes through the authority your governing documents provide or through a court order.

Can I fire my business partner as an employee?

Possibly, depending on who has authority over employment decisions and on the terms of any employment agreement. Firing a partner does not remove his or her ownership interest unless an agreement ties ownership to employment. In a close corporation, terminating a minority owner's employment as part of an effort to force a sale has supported a breach of fiduciary duty claim, so have a documented business reason before you act.

What if my partner refuses to sell?

Absent a buy-sell right or a court order, a co-owner generally has no obligation to sell. Your options then include improving the offer, mediation, claims based on the partner's misconduct, or dissolution if the legal standard is met. Each option carries its own cost and risk, and the choice should reflect what the business is worth and what you want it to look like afterward.

Can I dissolve the LLC and start a new one without my partner?

Doing that without your partner's agreement or a court order carries significant risk. Owners can owe fiduciary duties to each other and to the company, and Indiana appellate decisions have recognized a breach where an owner lured away business that in fairness belonged to the company. If dissolution is warranted, the proper approach is a dissolution and winding up that accounts for every owner's interest.

If a co-owner's conduct is harming your company, the order in which you act can affect both your legal position and your exposure to claims. Anne Medlin Lowe represents Indiana business owners in business disputes and drafts the operating and partnership agreements that set the rules for removing an owner. She can review your governing documents, identify the rights available to you, and help you choose a strategy that protects the business and keeps cost in proportion to what is at stake. Contact Anne to discuss your situation and options.

The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. For legal advice tailored to your situation, please contact us directly.