Most people do not start a partnership expecting to get into disputes with their partners.
However, just as with other relationships, business partnerships can go sour.
Partnership disputes about finances, authority, or the business’s goals can make a partnership become unworkable.
In other situations, one partner’s misconduct may put the business in jeopardy.
You can head off many partnership disputes before they arise with a detailed and well-drafted partnership agreement. A partnership agreement can address things like:
- How profits and losses will be allocated,
- Rules for decision-making,
- What each partner will contribute to the partnership,
- Each partner’s responsibilities and authority,
- How to resolve disputes, and
- How to divide the partnership if it dissolves.
In case of a partnership dispute, the partnership agreement will govern first. If the dispute relates to matters not covered in the agreement, then the dispute will be resolved based on provisions of the Florida Revised Uniform Partnership Act.
The Partnership Act also governs disputes regarding certain statutory matters that cannot be altered by a partnership agreement, such as breaches of a partner’s duty of loyalty.
A business partnership attorney can help you draft a strong partnership agreement that can help you avoid many types of partnership disputes down the road.
But even with a good partnership agreement in place, you may find yourself in need of a partnership dispute lawyer to resolve various issues your partnership may face. Here are five of the most common reasons you may need a partnership dispute lawyer.
1. Breach of Fiduciary Duty
Business partners have fiduciary duties of loyalty and good faith that cannot be waived. These duties are outlined by the Florida Statutes and include duties:
- Not to compete with the partnership,
- Not to violate the law or engage in intentional misconduct,
- To account to the partnership for profits and for the use of partnership property,
- Not to act on behalf of adverse parties, and
- Not to act with gross negligence or recklessness in conducting business.
If a partner breaches a fiduciary duty, you may be able to obtain an injunction or recover compensatory and even punitive damages.
2. Expulsion of a Partner
Sometimes a partnership becomes unworkable because of one of the partner’s actions. In such a situation, the other partners may seek to expel the troublesome partner.
Expulsion is typically governed by the partnership agreement. The partnership agreement may permit expulsion of a partner for things like:
- Being charged with or convicted of a crime,
- Filing for bankruptcy,
- Engaging in professional misconduct,
- Failing to carry out obligations under the partnership agreement, or
- Breaching the partnership agreement.
Florida law also permits expulsion of a partner by the unanimous vote of the other partners in certain circumstances, such as where it is illegal to continue in business with that partner. Or the partners may request a court order expelling the partner for wrongful conduct.
3. Disagreement About How to Run the Business
Often, as a business develops, disputes will arise among partners regarding how the business should be conducted. Common disputes include issues such as:
- How to use the business’s resources,
- Who has the authority to make decisions,
- Which business opportunities to take,
- How to use the business’s profits, and
- What business objectives to prioritize.
If you have a well-drafted partnership agreement, most of these disputes should be avoidable. Your partnership agreement should address all of these issues.
However, you may not have a partnership agreement, your agreement may be incomplete, or you may have disagreements about how your agreement should be interpreted.
If this is the case, you may need to reach out to a partnership dispute lawyer to help you resolve disagreements between partners about how to run the business. This might involve negotiating a new partnership agreement or amending your current agreement.
4. Breach of Contract
Partners may enter into various types of agreements to govern their business and the partners’ behavior toward the business. Some of these agreements may include a:
- Non-disclosure agreement,
- Non-compete agreement,
- Employment agreement, or
- Partnership agreement.
If one of your partners has violated the terms of a partnership contract, or if you have been accused of violating a contract, a partnership dispute lawyer can help you reach a resolution.
5. Breakup of Partnership
Partnerships can break up due to any number of factors. Sometimes a partnership breaks down because of disagreements and conflict. In other situations, one partner simply wishes to withdraw from the business, becomes incapable of participating, retires, or passes away.
Additionally, a partnership may terminate upon the expiration of a set term or when the purpose of the partnership is completed.
No matter the reason for dissolution, the process can give rise to a partnership dispute about issues like:
- The value of a terminating partner’s share of the business,
- Whether a partner has violated terms of the partnership agreement,
- How to divide partnership assets,
- How partnership debts are to be paid, and
- Whether other partners will be permitted to buy out a withdrawing partner.
As with issues pertaining to how the business is conducted, many issues relating to partnership termination may be resolved by turning to the provisions of your partnership agreement.
But if there is no partnership agreement or if the partnership agreement does not adequately address issues of termination and dissolution, some of these issues can become messy.
Regardless of your situation, it is a good idea to consult with a knowledgeable business partnership attorney when dissolving a partnership to ensure that your interests are protected.
Not every dispute among business must end in litigation. Most disputes can and should be resolved among the parties outside of court. Having good legal representation on both side of a business dispute is often the best way to resolve the matter quickly and without escalation.Business Disputes Attorney Michael Long
How BrewerLong Can Help
The skilled partnership dispute lawyers at BrewerLong have years of experience helping Florida businesses with all types of business disputes. We can also help with every other phase of your business, from formation to dissolution and everything in between.
Whether you need help drafting a strong partnership agreement or you are already embroiled in a business dispute, we can help. Call us today or contact us online to schedule a consultation.
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.