The most important business relationship is the one between partners. If they follow legal advice, it’s likely that they drafted their partnership agreement with the help of business law attorneys in California.
Some partner relationships thrive through mutual respect, support, and trust as the business grows. Others sour to the point that the only option is to dissolve the partnership. An experienced civil defense lawyer can make the arrangements.
What is Business Relationship?
A business partnership can be between two or more people who each contribute a financial share. For example, one partner provides 40% of the start-up costs, another adds an additional 35%, and the final partner provides the remaining 25%.
Their roles also differ; for example, the partner who put up 40% might be silent. The one who put up 35% might be the brains behind the product, and the 25% partner might be a marketing whiz.
It’s essential for a business attorney to be involved as soon as possible, to ensure the partnership agreement is fair and legally correct. The attorney also helps them choose the type of partnership that best suits them; for example, a general partnership, limited partnership, or limited liability partnership.
The roles of the business owners may evolve over time and new partners might join the business. Some changes might strengthen their relationship, while others eat away at it and put the business at risk.
Signs of a Troubled Business Relationship
All business partnerships go through rocky patches. Those with healthy business relationships emerge unscathed. Others might show signs of potential conflicts. It’s important to recognize potential problems so legal counsel can resolve them using a peaceful approach.
Unclear or Absent Communication
Communication is the key to any successful relationship. Lack of communication or miscommunication can lead to business disputes, including resentment and disinterest, and even intentional conflict.
One of the signs of unclear communication is vagueness. Vague questions, vague answers, vague conversations, and wishy-washy behavior.
Worse than vagueness, however, is absent communication, such as when emails aren’t answered, phone calls are not returned, and meetings are missed.
Poor Management of Finances
It’s not unusual for disgruntled partners to feel that their efforts were consistently undervalued, so the business “owes” them something. They may buy personal items or go on luxury holidays and charge them to the business’s expense account.
It’s important to spot financially reckless behavior and address it immediately. If your partner refuses to discuss the company’s finances, it’s time to consult an experienced attorney who can arrange formal negotiations.
Disagreements on Important Matters
When you started the business, you and your partner may not have agreed on everything but you almost certainly agreed on the important things, like the mission and vision. Over time, the number of disagreements increases, and they are about important things, like whether you should extend into another city or cut one of the departments.
Your quarreling could affect staff morale. Not only that, but the awkwardness between you could affect your B2B relationships.
Lack of Respect and Trust
One of the biggest warning signs is your partner not respecting your time, including being late for meetings, being late coming to work, and changing important arrangements at the last minute.
You might notice your partner treating you condescendingly. This occurs not only in private but also at work in front of business partners, clients, and employees.
Conflict of Interests
Your partner might act in his best interests and not the company. Examples include:
- Moonlighting as a director of a company that is your direct competitor.
- Purchasing sub-standard products from a family member rather than better quality products from another supplier.
- Accept gifts from people or companies who want to establish a relationship with the company. For example, tickets to a sports event in the owner’s box in exchange for a contractor agreement with an engineering firm.
When to Seek Professional Help from a Civil Defense Lawyer?
It’s a good idea to consult a civil defense lawyer as soon as you spot any legal risks. If you delay, the number of risks increases and the extent of the problem stretches further and further. For example, occasionally dipping into the business expense account to pay for personal meals at restaurants could grow into birthday parties in France.
If you take action early on, there is still a chance that the partnership can be saved through negotiation. If it can’t be saved, then arrangements for the dissolution of the partnership can be made before acrimony and spite set in.
Understanding the Legal Repercussions of a Dissolved Business Relationship
Dissolving a business starts when one of the partners files articles of dissolution to the secretary of state or the Department of Corporations.
Assets must be liquidated to pay outstanding debts; for example, suppliers or contractors.
Final federal and state tax returns must be paid. All amounts due must be paid in full before the business closes its doors for the last time.
Shareholder distribution is the last step. Shareholders are entitled to all assets that remain, including cash in bank accounts and cash obtained by the liquidation process. Payment is pro rata; for example, a partner who owns 40% of the business will get 40% of the remaining assets.
Prepare to Take Legal Action with Our California Employment Attorneys
Some business relationships can be saved with the help of Californian employment lawyers, but there are many cases where the partnership is too far gone to rescue the company. If this happens to your business, Our expert lawyers will help you through the dissolution of the partnership.
Our attorneys are on hand to answer any of your business and employment law questions. To book a free 30-minute consultation with an expert, contact us at 866-320-4854 at LibertyBell Law Group today!