A business partnership is the coming together of two or more parties with the desire to conduct business with each other. Partnerships are common amongst companies of any size due to the benefits they offer. However, when individuals are working closely together, disputes can and do arise. These disagreements can take several forms, including:
- Breach of Contract. Entering into a formal partnership will typically involve several agreements that require signatures from all parties involved (i.e. a partnership agreement, an NDA, or an employment agreement). If your partner violates anything that is outlined in these agreements then there is cause to file suit.
- Partnership Deadlock. Deadlock can occur when there is an even split over a matter that partners are attempting to decide on. This can lead to the company’s inability to move forward with operations and more.
- Undermining of Business Opportunities. A business partner can undermine a business opportunity through sabotaging relations or cutting ties with the opportunity. If one partner is set in their ways and decides they do not like the direction the other partner is taking, they can attempt to destroy the opportunity all together.
- Misappropriation of Important Information. If your company has confidential trade secrets and your partner is feeding that information to a competitor for a larger pay out, it is critical that you contact an attorney before your company suffers further monetary damage.
- Partners embezzle funds when they are funneling company profits into their private bank account illegally.
- Undisclosed Business Dealings. If a business partner is making decisions on behalf of the company without having a discussion with co-partners, then they are participating in undisclosed business dealings. Undisclosed business dealings can create substantial issues between partners due to the lack of consideration and possible damage that that can impact both the company and the partners equally.
- Breach of Fiduciary Duty. When a partner begins placing their well-being over that of the company, they have breached the fiduciary duty of the partnership.
This list is not exhaustive. When partnership disputes begin impacting business, the health of the company must be considered and a plan to protect the company’s assets must be executed.
Hardin Law Group, APC is a Southern California based law firm with 20 years of experience in litigation. Our firm has the knowledge and understanding to guide you through the resolution process of partnership disputes with the ability to protect your interests in the company.
Types of Business Partnerships
In order to properly assess the situation, the parties must understand what type of partnership they have entered into. Without a written agreement overseeing the partnership, things can get complicated.
A general partnership can be entered into without an agreement and leaves both parties financially liable. If a dispute arises and the company stops generating revenue, the bank can take everything and more from both parties. If one of the partners pays their share of the debts to the bank and the other party has a remaining balance and nothing left to give, the remaining balance will be paid off by taking more from the party that has already paid their debt. For this reason alone, it is important to discuss a written agreement in any type of partnership to ensure the protection of all parties. If a dispute arises without a written agreement, it is imperative to work towards a solution.
A limited partnership assigns general partners and limited partners. The limited partners are essentially investors that are able to invest their money into the company without taking on total fiscal responsibility, meaning they can avoid the company’s debt. However, the trade off is that they have no managing power and are not involved in the day-to-day operations. A common dispute that can occur between limited and general partners of a business is the failure to disclose accurate revenue. If this transpires, the limited partner is not earning the income they are entitled to.
Alternatives to Litigation
If you are not interested in going to trial, there are several alternative resolutions such as arbitration, mediation, and possible negotiations. All options, including litigation, are a better alternative than allowing the business to suffer further financial loss that could eventually lead to its closure. Do not delay, when disputes go unresolved for an extended period of time the situation can go downhill quickly.
The process for solving a business partnership dispute can be complicated and messy, waiting for things to sort themselves out is not realistic. Contact Hardin Law Group, APC for a free case evaluation today.