The Most Common Reasons to Hire a Business Partnership Dispute Lawyer

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Article By: Marc Newman

A Leading Commercial Litigation Attorney in Michigan

The Most Common Reasons to Hire a Business Partnership Dispute Lawyer

Published on: July 22, 2020

business partnership attorney

No matter how amicable your business partnership is, it is likely that you will benefit from the assistance of a business partnership attorney at some point.

If you are starting a partnership, have questions about partnership issues, or have become involved in a dispute with your partners, you should consider reaching out to an experienced partnership dispute lawyer.

When Do You Need a Business Partnership Attorney?

An attorney can help you with all legal issues relating to your partnership. The following are some of the most common situations where you should consult a partnership lawyer.

Starting a Business

The term “partnership dispute lawyer” makes it sound like someone you need only after you get into a disagreement. But actually, there is a lot a partnership lawyer can do for you even before you start your business. By seeking good legal advice at the outset, you can actually avoid a lot of partnership disputes down the line.

A partnership lawyer can help you with various details of your business, such as filing necessary documents with the government, selecting a business name, and registering your intellectual property. But most importantly, they can help you draft a detailed partnership agreement that will explicitly outline how you will run your business and provide mechanisms to avoid partnership disputes before they ever begin.

Breach of Contract

A common reason you may need to sue a business partner is to enforce the terms of a contract. You may have more than one contract with your partner. Common agreements between partners include:

  • Partnership agreements,
  • Operating agreements,
  • Employment agreements,
  • Noncompete agreements, and
  • Nondisclosure agreements.

 

If your partner breaches one of these contracts, you may need to sue either to compel them to comply with the agreement or to recover damages for losses caused by their breach.

For example, let’s say your partnership agreement requires both partners to sign any contracts encumbering partnership assets. However, your partner decides to take out a loan without consulting you, and they use your business equipment as collateral. If this action damages you or your business in any way, you could sue your partner for breach of contract.

Misusing Partnership Assets

Some partners are not good at keeping their own assets and funds separate from the business. For example, they may use the company credit card to pay for their own personal bills. Or they may use your equipment or take your products for their own personal use without accounting for it. This can drain your company of much-needed cash flow, cut into your profits, or prevent you from fulfilling your obligations to investors.

If your partner won’t stop treating your business as an extension of their own bank account, you may need to take steps to protect your company. A partnership dispute lawyer can help you understand your options and reach a resolution.

Partner Conduct

Sometimes a partner’s conduct outside of work can affect your business. For example, if your partner commits a crime, it can hurt the goodwill of your business. If they commit fraud or file for bankruptcy, your business assets may be at risk.

If you are concerned that your partner’s conduct could come back to bite you or if it is already starting to affect your business, it’s important to talk to a partnership dispute lawyer right away. They can help you take steps to protect your business.

Breach of Fiduciary Duty

Partners owe one another fiduciary duties of loyalty and care. Partners must act in the best interests of the partnership. If your partner hurts you or your business by breaching a fiduciary duty, you may need to pursue a remedy in court. Examples of breach of fiduciary duty include:

  • Failing to disclose a conflict of interest;
  • Taking business opportunities for oneself;
  • Concealing information about the business from other partners;
  • Failing to use adequate care in managing the business;
  • Carelessly exposing the partnership to liability; and
  • Exposing the company’s trade secrets or violating its copyrights or trademarks.

 

Some of the issues mentioned previously, such as engaging in illegal behavior and misusing partnership funds, can also be breaches of fiduciary duty. When these breaches result in damage to you or the business, you have the right to sue for any damages.

Partnership Disputes

Ideally, you and your partners will see eye to eye on how to manage the business. However, over time, partners can have different ideas about which direction the business should go.

Many partnership disputes can be resolved by turning to the terms of your partnership agreement. However, if you do not have a partnership agreement, it can be much more difficult to resolve your disputes.

If you are considering forming a partnership, one of the best things you can do is to have a lawyer help you put together a partnership agreement. Your business partnership attorney can advise you about what things to include and help you think about how you will resolve future disputes. If you are already embroiled in a partnership dispute, an attorney can help you negotiate an agreement with your partners or pursue any other necessary legal action.

Dissolving a Partnership

Sometimes continuing in a partnership simply isn’t possible. In some cases, this can be the result of disputes among the partners or serious malfeasance by one partner. Sometimes it is because the purpose of the partnership has been fulfilled. In other situations, it’s simply the result of changes in the partners’ circumstances. For example, a partner might pass away, retire, move, or decide to focus on other opportunities.

Regardless of the reasons, a business partnership attorney can help you wind up your partnership and make sure that all assets and liabilities are distributed fairly.

Talk to a Partnership Attorney Today

The experienced partnership dispute lawyers at the Miller Law Firm, P.C., have been helping businesses in Michigan and around the country for nearly 25 years. We know how much you care about your business, and we want to help you protect it. Give us a call or contact us online to learn what we can do for you.

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