Blog Post

On Partnership Disputes & How to Avoid Them

> Blog > Business Law > On Partnership Disputes & How to Avoid Them

Beginning a business partnership can be an exciting time whether you are a veteran tycoon or an amateur entrepreneur. A partnership is a popular way to structure and finance a new business and brings about new challenges, shared visions, and reason to celebrate the smallest of victories.

No matter how successful your business is or may become, a partnership dispute can result in lost profits, missed opportunities, and in worst case scenarios culminate in the dissolution of the business. Whether you are dissatisfied with the level of effort put forth by a partner or you find yourself questioning the intent or actions of a partner, business partnerships are no stranger to dispute.

Common Partnership Disputes

Breach of Contract

A contract, either verbal or written, establishes agreements between partners and may be the most common partnership dispute. A breach of contract can include a variety of monetary or operational disputes among business partners and it is important to take care when preparing a partnership contract.

Breach of Fiduciary Duty

Upon the formation of a partnership, each party has an obligation to act in the best interest of the company. A partner shall not redirect or misappropriate company funds or take any action that would willfully harm the business or its partners.

Violations of Non-Compete Agreements

This is an agreement devised to protect against unfair competition caused by one party using trade secrets or knowledge obtained with one business and utilizing it as a competitor. Non-compete agreements are commonly used when one partner buys out another and is intended to restrict the selling partner from becoming a competitor. Violation of a non-compete agreement typically results in litigation.

Minority Owner Rights

Partnerships are not always equal and it is not uncommon for some partners to own a larger share of a business. Other partners are considered minority owners and though majority owners typically have greater control over company decisions, minority owners still have certain rights. If a majority partner violates those rights, minority partners are entitled to seek a legal option.

Financial Rights

Disputes regarding financial rights or obligations of company owners generally come up when a business is going through financial hardships. Serious executive level problems are likely to result if there is no explicit guidance within a partnership agreement concerning how profits and liabilities are to be handled.

Legal Solutions for Avoiding Partnership Disputes

There is no question that partnership disputes can become particularly complex when it comes to partner obligations, liabilities, and expectations. At the very beginning of establishing a partnership, all partners involved should have a clear understanding what their obligations are, how liabilities or assets should be managed, and a protocol in place to assist in the handling of dispute resolution.

So how exactly does one avoid a partnership dispute?

All of this can be understood and outlined in a partnership agreement document. A partnership agreement and any other supporting documents assist in the management of partner expectations regarding business operations and help reduce the possibility of disputes.

When drafting or amending partnership documents, it is essential to make use of professional legal counsel to ensure the documents address all aspects or concerns surrounding the partnership operations. Discussions with a business law attorney will allow all partners to have a clear understanding moving forward and confirms all documents are prepared in accordance with state laws.

This not only gives all applicable parties a sound discernment of their partnership agreement but also puts in place dispute resolution procedures in order to prevent disputes from going to litigation and even preventing disputes altogether.

Seasoned Business Litigation Lawyers

Litigation is not always the answer and our team of business attorneys work hard to resolve disputes through alternative means such as negotiation, mediations, and arbitration. We prefer to resolve disputes as quickly and effectively as possible.

When alternative dispute resolution is not an option and you are forced to consider litigation against the offending partner, our firm is no stranger to the courtroom. Our seasoned business lawyers can combine their deep knowledge of today’s corporate standards and partnership practices with strong high-profile litigation to provide every client we take on with the best counsel and results possible.

Corporate Structuring & Partnership Dispute Resolution Attorneys

The attorneys at Kundani Chang Khinda & Wilson LLP will be your partners in any partnership dispute matters you may be facing. Whether you are currently involved in a partnership dispute matter or are taking the necessary steps to draft a partnership agreement, we have the insight and expertise to support your business both today and tomorrow. Call or contact our firm today to schedule a free consultation and learn how we can help.

Contact Us

We want you to feel comfortable discussing your legal issue with us, so we offer a free consultation to learn about your problem. Contact us today to setup a time to come in and talk with our team.

Our Firm Locations

Anaheim Hills

155 N. Riverview Drive Suite 212,
Anaheim Hills, CA 92808
Get Directions 714-525-2400

Los Angeles

611 Wilshire Blvd. Suite 325,
Los Angeles, CA 90017
Get Directions 213-627-2771

San Gabriel

8810 East Las Tunas Drive,
San Gabriel, CA 91776
Get Directions 714-525-2400

Union City

2 Union Square Suite 102,
Union City, CA 94587
Get Directions 714-525-2400

Contact Us

We want you to feel comfortable discussing your legal issue with us, so we offer a free consultation to learn about your problem. Contact us today to setup a time to come in and talk with our team.