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Partnerships are not always easy. No matter how long the partners may have been buddies before entering into a partnership agreement, when conflicts arise, they can be difficult to resolve. To complicate matters, it is not uncommon for friends to go into business together with only a handshake, instead of a formal corporate entity formation.
The parties may start a business together and, in the process, put on proverbial blinders and ignore even thinking of the possibility of having conflicts or how to resolve them if they happen to occur. Some common disputes include:
- The partners simply have conflicting personalities and have difficulty working together since their work styles do not mesh.
- One wants to add a new partner and the other one doesn’t.
- They are unhappy with the direction the business is going and believe profits will be lost.
- One partner may be dishonest and mishandling assets.
- The business just may not be as profitable as expected.
- The obligations of each party are not clearly delineated and there is confusion about how the business is supposed to run.
- One partner believes he or she is doing all the work while the other partner or partners are reaping the benefits.
Business disputes are best resolved if there is a good, strong partnership agreement that articulates how business disputes will be resolved. If such an agreement does not exist, Lerner & Weiss will work with mediation and negotiation to work out a cost-effective and expedient solution. If no middle ground can be found, dissolution of the partnership may be the answer.
Shareholder disputes need to be resolved as quickly as possible so the operation of the business is not disrupted. Examples of common shareholder disputes are:
- One or more shareholders may disagree with action taken by the majority.
- A shareholder may allege there has been a breach by a shareholder of the fiduciary duty.
- A shareholder may allege that another shareholder has committed fraud.
- One or more shareholders may simply want to terminate their shareholder agreement.
As with partnership agreements, a properly written shareholder agreement that defines how disputes will be handled can avoid costly litigation. One solution may be for shareholders to buy out the shares of the disgruntled shareholder. On the other hand, this may create another dispute concerning the value of the shares.
Whether you are involved in a partnership or shareholder dispute, contact our partnership and shareholder dispute attorneys at Lerner & Weiss for a consultation. We will handle the dispute in a way to minimize any loss to the business. We will draft partnership and/or shareholder agreements to have in place for when the next partnership dispute arises.
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