Starting and running a business is never as simple as it sounds. You can never determine where or when a disagreement that threatens the very life of the business may occur. In partnerships, the partners themselves are often the primary cause of the dispute.
Although you may have a well-crafted partnership agreement, resolving partnership disputes is never easy. Disagreements often occur over issues such as company direction, money, and management. Which makes it critical to have outside help from San Francisco, CA business law attorneys of sanfranciscobusinesslawyerblog.com.
Common Areas of Partnership Disputes in San Francisco, California
Partnerships offer numerous advantages when forming a business. However, things don’t always go as smoothly as expected, and disputes are bound to happen. Some of the most common business partnership disputes in California include the following:
Misappropriation of Business Assets
Many partnership disagreements occur due to the misappropriation of company assets. There will always be discord if one partner uses company assets for their personal activities and expenses. For instance, when one partner withdraws $5,000 from the company account to take a road trip or pay their mortgage.
Disclosure of Trade Secrets
Every business includes confidential information that gives it a competitive edge. Therefore, business partnership agreements stipulate that trade secrets need to be kept confidential. A partnership dispute will arise should a partner share the information without authorization.
Breach of Contract
Both written and verbal contracts create binding agreements between business partners. However, it is common for partners to enter into contracts without the help of an attorney because they want to show trust. Doing this exposes you to future litigation when your partner breaches the contract.
Breach of Fiduciary Duty
Each partner is legally obligated to act in the business’s best interest when forming a partnership. Therefore, they should not misappropriate company resources, divert business opportunities for themselves, or take actions that hurt the company’s bottom line. Partnership disputes often arise when a partner fails to uphold their fiduciary duty.
Uneven Workload Distribution
It is common for partnership agreements to include workload distribution. Every partner has work responsibilities to fulfill. However, it is not uncommon for a partner to fail to complete their duties, thus putting a huge workload on the other partner(s). This will lead to conflict, especially when the other partner believes the workload is distributed unevenly.
How to Resolve Partnership Disputes in San Francisco, CA
Business partnerships often have disputes, and San Francisco businesses are not immune. If you need to resolve a partnership dispute, business law attorneys of sanfranciscobusinesslawyerblog.com. Follow these steps to break the cycle of endless partnership disputes:
You can always negotiate a compromise with your business partner. However, keep in mind that it is not about winning or losing. Instead, negotiations are about trying to come up with a solution that suits all involved parties.
Directly address the issue with your partner in an informal setting. You can always discuss it privately before involving the other partners. It can also help to involve the staff if the dispute affects them directly. Always keep in mind that you do not have to conduct negotiations by yourselves.
Having a neutral third party as a mediator helps when disputes become heated. This is especially vital if you want to stay in business together. Mediation ensures you have a guide to lead the conversation through rough patches.
Having a litigation attorney, for example, ensures you have a professional that can facilitate healthy communication. They will also ensure your business remains the top priority by keeping decision-making on track. When done right, mediation often leads to a stronger and healthier partnership.
Sometimes, partnership disputes arise because of a partner’s misconduct. These may include fraud, breach of fiduciary duty, misappropriation of business assets, and failure to meet obligations. All of these scenarios can lead to a lawsuit.
Because certain violations can potentially mean the award of damages, litigation may be your best solution. An experienced business law attorney from sanfranciscobusinesslawyerblog.com will work with you to protect your best interest.
Business partners may decide they no longer want to work together after a dispute. However, it is common for them to want the business to continue. In such cases, the best solution is for the other partner(s) to buy out the other. If your partnership agreement includes a buy-sell clause, it will include a set of procedures for you to follow.
Without the buy-sell agreement, you will have to start by evaluating the company’s value. You can then negotiate who buys out the other. Having legal counsel present will ensure the buy-out is smooth and in your best interest.
Unfortunately, partnership disputes can occur at a time when the business is facing dire financial problems. Your company becomes insolvent when its liabilities outweigh the assets. Therefore, your best option is to file for bankruptcy.
Declaring bankruptcy ensures you don’t wallow in debt. It also gives you the time to restructure the debt and resume operations in certain conditions. Whichever the case, ensure you have an attorney present to help you and your partner(s) navigate the bankruptcy code.
Revisit Your Partnership Agreement
You should anticipate partnership disputes regardless of the trust level between the partners. Therefore, it is vital to have an ironclad partnership agreement. It should recognize potential issues and stipulate a guideline on how to address them.
If you have a partnership dispute, it is time to revisit your agreement. You can always revise, amend, or recreate it to avoid future disputes. However, don’t forget to seek the legal help of our attorneys when revisiting your partnership agreements.
Contact an Experienced San Francisco Business Law Attorney Today
You need to reach out to an experienced attorney as soon as a dispute arises in your partnership. Doing this will speed up the process of finding a solution while saving you the cost of a lawsuit. Luckily, business law attorneys of sanfranciscobusinesslawyerblog.com are here to help. Contact us for a free consultation and let us help you come up with a strategy that can quickly resolve your partnership dispute.