It’s natural for people to have differences of opinion and to quarrel occasionally. They’re often easily resolved and business continues as usual. Major partnership disputes in business, however, usually stem from long-term dissatisfaction that reaches the point where they need business law attorneys in California to resolve the matter.
If you’re thinking about going into a business partnership, you should find out more about formal partnership agreements and their role in resolving disputes. If your existing partnership is already in trouble, there are several ways in which you can resolve business disputes and come to a final decision.
Understanding Partner Disputes in California Businesses
Partnership disputes are born out of distrust, suspicion, secrecy, and intentional conflict. They can make the business virtually ungovernable and ruin any relationship the partners had before they went into business together.
A common cause is not clearly delineating their roles in the business. For example, two friends go into business together and in the beginning, they share all responsibilities. One partner becomes business savvy and gradually assumes the other partner’s responsibilities.
This partner may feel sidelined and spend more time on the golf course than in the office. This creates resentment in the business-savvy partner who’s doing all the work while the slacker shares equal profits. Resentment grows on both sides until the partnership is untenable.
The only solution is to get an unbiased third party, such as a civil litigation attorney in California, to help them to reach a resolution.
What are the Different Types of Partner Disputes?
Partner disputes vary in severity and some have legal ramifications. It’s important to know the major types of disputes to guard against them.
Breach of Contract
The most important thing partners can do is draw up a formal partnership agreement. This should always be done with the help of business litigation lawyers in California to ensure that it meets all the legal requirements.
The contract must include certain information. For example, who was the main financial contributor, the type of partnership, each partner’s role in the business, and what happens when a partner breaches the contract.
Partnership Agreement Violations
Partnership agreement violations occur when one partner fails to carry out their duties to the business and the partners.
Partners have a fiduciary duty to each other, which is a duty of care and loyalty to the company. If your partner fails in their fiduciary duties by acting unethically, the agreement has been violated and you can pursue legal courses of action.
Business Dissolution and Winding Up
Sometimes the only way out is to dissolve the business. A business law attorney is invaluable here, as they determine the type of dissolution agreement and ensure it meets state and federal requirements.
Types Of Dissolution Agreements:
- Agreement to dissolve: This a relatively simple because one partner is no longer interested in the business and the other partner buys them out.
- Buy-sell agreements: They state who can buy into the business should a partner die or decide to sell their share. For example, the outgoing partner can’t leave or sell his shares to his family.
- New dissolutions: This is also relatively simple because both partners want to end the partnership. The dissolution agreement states their duties and anticipated time frame.
- Statement of dissolution: In the final step of the process, you must file a statement of dissolution in accordance with your state’s laws. The IRS is notified and goes through a checklist to determine if the partnership still owes tax.
Unfair Competition and Antitrust Issues
Governments put anti-trust laws in place to protect consumers and other businesses competing for their market share. The laws regulate certain aspects of business, for example, price fixing. The aim is to ensure ethical business practices.
Alleged Negligence or Misrepresentation by Partners
In negligent misrepresentation, a party enters into a contractual agreement based on information that is later found to be false. The claimant must have used the information in a way that resulted in a loss. The contract is rescinded and the claimant may be awarded compensatory or exemplary damages.
For misrepresentation to be negligent, it must be proved that the party provided false information through carelessness or without good reason to believe it was true.
How a Civil Defense Lawyer Can Help You Navigate Business Law in California with Business Law Attorneys
All business-related activity is governed by business law in California. However, it’s such a broad term that it contains dozens of specializations. Civil litigation lawyers help you comply with state and federal statutes so that your business is completely compliant.
The Role of Business Law Attorneys and Civil Litigation Attorneys in Partner Disputes in California
Business law attorneys in California act as unbiased third parties who oversee the dissolution process and ensure a fair outcome.
For example, a civil attorney meets with the parties separately to hear both sides and find out each party’s terms (restitution for loss of income based on unethical behavior). The attorney negotiates with both parties to determine reasonable compensation.
Find the Right Civil Defense Lawyer for Your Business Partner Dispute in California
At LibertyBell Law Group, we have a team of expert business lawyers who can provide assistance for all business-related issues, including business partner disputes and employment disputes.