Partnership disputes are one of the most common types of business disputes. Many times a partner suspects another of diverting funds, planning to steal clients and start a competing business, or they are just not carrying their weight. These disputes can cost the business profits and may even result in dissolution. A strong partnership agreement is the key to avoiding and addressing any disputes that may arise. “Do it yourself” business forms and legal website canned agreements will cost you more money in the long run. You can count on that. Having an experienced Chicago partnership dispute lawyer represent your interests is essential to protect your business investment. Discussions with a business law attorney will enable the partners of have a very clear understanding of their rights and duties moving forward and will ensure all legal documents are prepared in accordance with state laws.
Types of Partnership Disputes
Violations of Non-Compete Agreements
Non-compete agreements are also referred to as restrictive covenant agreements They attempt to prohibit business associates and members from using knowledge obtained from the business and unfairly using it to compete with the business. Although enforceable, they cannot be too broad and should be limited in time and geographic area.
Ownership Interest Rights
All interests in a company are not equal. Some partners have a lesser interest or are “Limited Partners.” Those that do not own the larger share of the company are also referred to as minority partners. Sometimes the larger partner breaches his fiduciary duties to the minority partners or simply wants to dissolve the partnership, and vice-versa.
Breach of Fiduciary Duty
A fiduciary duty is a duty imposed by law that one partner or officer owes to another. There are many ways to breach a fiduciary duty but the most prevalent is misappropriating or stealing funds. Another example would be actions or inaction that negatively affects the business entity.
Breach of Contract
The contract between the owners and members of a partnership (and its interpretation) is the most common partnership dispute. When the agreement is not followed strictly, litigation about the agreement typically ensues.
Absent a thorough written agreement concerning how profits and liabilities are to be handled, as well as an incoming or leaving partner, costly executive level problems will result. At the very beginning of a partnership, all anticipated problems should be addressed, as well as a process by which to handle disputes.