Breaking Down the Dispute: Understanding Ownership Issues in Private Business

A dispute over ownership of a private business can arise in various contexts. Owner disputes are common in small businesses where owners may find themselves at odds over management styles, equity percentages, or the company’s future. Because business owners can have a lot of their personal capital tied up in a company, a dispute over ownership of a private business can become emotional and contentious, and a dispute can sometimes rage for years with no satisfactory resolution in sight. These private business ownership issues can include breach of contract claims and more complicated issues like matters of corporate governance and breach of fiduciary duties.

At BrewerLong, our team of experienced Orlando small business attorneys handles complex ownership issues for private businesses every day. Read on to learn more about handling a private business ownership dispute.

Types of Private Business Ownership Disputes 

Disputes between business owners can take a variety of different forms. Sometimes, one business owner will accuse another of breaching their fiduciary duty. Other times, private businesses will allege that an owner engaged in self-dealing. This could mean that the owner attempted to orchestrate brand deals or partnerships using the company’s name and resources that were particularly advantageous to their own finances. Sometimes, a dispute can be as simple as a breach of contract claim between existing owners and prospective owners for a share of a company’s equity.

Owners can also allege that they have been “frozen out” of business processes, procedures, and management. And in rare but extreme circumstances, owners can accuse each other of criminal behavior such as fraud, theft, misrepresentation, and more. 

Handling an Ownership Dispute of a Private Business

If a dispute over a private business does arise, business owners have many options for resolution. These include:

  • Direct negotiation of the dispute between the parties, with or without counsel present;
  • Pre-litigation or voluntary alternative dispute resolution, such as arbitration or mediation using a neutral third-party mediator or arbitrator selected by the parties; 
  • Alternative dispute resolution, such as arbitration or mediation after a lawsuit is commenced; and
  • Pursuing a lawsuit in an appropriate venue.

In most cases, private businesses prefer to avoid the cost of litigation, especially in disputes between owners. In an ownership dispute, the parties must often continue to work together despite having had serious conflict over aspects of their business. While involving a third-party negotiator or mediator can help the parties see their dispute clearly, a lawsuit can entrench bitter feelings and cause lasting harm to an otherwise profitable and thriving business.

Best Practices

With these things in mind, the best method of resolving business disputes is typically to avoid them altogether. One solution is to negotiate and draft clear and thorough contracts that outline each party’s rights and responsibilities. Specify precise and careful terms for payment, delivery, and other frequent areas of dispute. Doing so can ensure smooth transactions, which leads to successful, long-term business relationships. Owners, vendors, and employees alike can succeed in environments like that.

Obtaining Positive Outcomes

In some companies, the first step in an owner dispute may be an internal investigation. Sometimes, internal investigations help provide enough information and transparency to snuff out the dispute entirely. However, smaller companies may not be able to undertake a full-scale investigation, or be impartial in doing so. In these instances, owners in a business dispute may wish to proceed immediately to some kind of dispute resolution—if not directly to litigation.

As mentioned above, disputes between owners can be very emotional. However, there is often a shared interest in maintaining or improving the company’s value at the heart of the dispute, even if each party views the path to achieving this differently. 

For this reason, owner disputes can be an excellent place to consider mediation. Mediation is a low-stakes, non-binding way for parties to work to find a mutually agreeable middle ground. In mediation, the parties can fully explain their complaint. They are given an opportunity to enumerate the injustices they feel they have faced and describe what they view as another owner’s bad conduct. By enabling an aggrieved party to discuss their issues openly, mediation can give owners needed closure on hot-button issues while avoiding prolonged litigation, unwanted press, and potentially destroying the company that both parties worked so hard to build.

How BrewerLong Can Help Your Florida Business

With decades of experience as advocates for the Florida small business community, BrewerLong is here to help, listen, and collaborate. We can help you if your ownership team is stuck at an impasse and guide you through the thorniest private business ownership disputes. We are a relationship-focused law firm that can give your business the personalized attention it deserves. Contact BrewerLong today, and we can handle the law so you can focus on business.

This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.

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