Proven Partners For Financial Health

5 Ways to Handle a Business Dispute Between Partners

On Behalf of | Jul 18, 2022 | Business Law

business partners arguing

A limited liability company or limited liability partnership can be a great structure for you to utilize for your business. It allows you to retain a significant amount of control over your operations and share in a greater portion of the business’s profits, all while limiting your personal liability to a great extent. But no business is without its problems. If you’re reading this post, then you might have gotten into a dispute with a partner about one of a number of issues including, but not limited to, any of the following:

  • Breach of the fiduciary duty
  • Disagreements over how resources should be utilized
  • Conflict over where authorities lie and overlap
  • Uneven workloads
  • Disputes over intellectual property ownership
  • Disagreements over business objectives

Options to resolve your dispute

If you’re dealing with a partnership dispute, then you’re probably wondering about how best to address it. Here are some of your options:

  • Engage in alternative dispute resolution: In most instances, this is going to mean mediating your disagreement. If communication with your partner is strained, then this might be a great option, especially if you hope to remain in business with your partner. This unbiased third-party mediator can help you and your partner see and understand each other’s position in hopes of finding common ground and resolution. It can also help you set the parameters of your relationship moving forward so that you can avoid future conflicts.
  • Negotiate a buyout: If your business relationship has soured to the point of no return, then you might need to think about how one of you can exit the business. This might take the form of a buyout agreement, where one partner simply purchases the other partner’s share of the business. Of course, this requires an accurate valuation of the business unless you had a buyout agreement in place when the business was started.
  • Sell to a third party: If neither you nor your partner wants to continue the business, then you can consider selling it to a third party. Again, a proper valuation is going to be key to ensuring that your interests are protected.
  • Dissolution: This option is usually utilized by those partners who feel that the business is no longer viable and therefore won’t garner a purchaser. This process can take some time, too, since you’ll have to sell all of the business’s assets, pay off creditors, and only then split any remaining proceeds. If you and your partner have disagreements about how best to dissolve the business, then you might have to have court intervention.
  • Bankruptcy: If your disagreement with your partner is based on the business’s financial woes, then seeking bankruptcy protection might be your best option. If you successfully do so, then you may be able to eliminate some of your business debts and return to financial stability. This might even give your business some renewed longevity. As a result, your issues with your partner might disappear.

Of course, there are other ways to resolve partnership disputes. If they’re severe enough, then you may need to consider litigation. This is especially true if there’s been a breach of the fiduciary duty or some other form of misconduct. Many of these potential problems can be avoided by properly structuring your business, and executing an operating agreement from the start.

Finding the solution that works for you

What’s important is that you find the path forward that is best for you and your business. You need to keep an eye on protecting your financial interests, which may require you to explore all of the options available to you. If you’d like to learn more about what you can do to navigate these trying times, then please consider reaching out to an experienced business law attorney. The attorneys at Gudeman & Associates work hard to ensure your interests are well protected. Contact us today to schedule a free 30-minute consultation.