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how to resolve a partnership dispute

How to Resolve a Partnership Dispute

Do you need to know how to resolve a partnership dispute? Our civil litigation attorneys are here to help you navigate complex legal situations. Schedule a free consultation with our civil law firm today.

As with any relationship, a business partnership has its ups and downs. Whenever things go well, everyone is happy. Typically, this is when business is great. 

However, when things aren’t going so well, small disagreements blow into major arguments. Often, businesses suffer even further when that happens. Unfortunately, this also means that once happy business partners find themselves trying to resolve a partnership dispute. 

So, what do you do when you find yourself in a cycle of endless disputes? Let’s take a look at a few solutions. 

7 Ways to Reach a Resolution

#1 Mediation

When a dispute becomes too heated, it helps to have a neutral third party available to act as a mediator. Then, partners who still want to stay together have someone to guide the conversation through rough terrain. 

With an objective mediator, such as a litigation attorney, there’s someone to facilitate healthy communication and keep the decision-making on track. Often, solid mediation results in a stronger partnership. 

Moreover, it’s an effective way to resolve a partnership dispute with a clear definition of goals, responsibilities, and direction. 

#2 Sell to New Owners

At times, business partners reach a stage where they no longer want to work together. Even when the business is still viable, the relationship can reach a breaking point. If this is the case, it makes sense to search for a buyer to take over one or both partners’ interest in the company. 

In some cases, partners find buyers among competitors, current employees, or brokers. Regardless, it’s a good idea to work with an experienced legal team to ensure the transaction is fair and sound. 

#3 Dissolution

In some situations, it becomes apparent that there’s no way to salvage a business. Then, dissolution of the entity might be the best path forward. If the partners agree to a voluntary dissolution, it’s as simple as filing paperwork with the state, paying off any debts, selling assets, and distributing proceeds. 

However, some partners cannot agree on a dissolution. In this case, it may require help from the court system. Through a lawsuit, it’s possible to reach a judicial dissolution of the company. When this happens, the parties lose control over the process. 

That means they have to abide by the decision of the judge. 

#4 Litigation

At times, disputes arise due to the misconduct of one partner. 

  • Breach of fiduciary duties
  • Failure to satisfy obligations 
  • Fraud 
  • Misappropriation of assets

The list goes on. All of these scenarios have the potential to result in a lawsuit. When you need to resolve a partnership dispute, you rarely expect it to become a legal matter. 

However, certain violations have the potential to result in awards of damages to an injured party. With an experienced civil litigation attorney on your side, you have someone to analyze your situation and pursue your best interests. 

#5 Buyout

When business partners decide they no longer wish to work together but want the business to continue, it’s possible for one or a group of partners to buy someone else out. If there’s a buy-sell agreement from the formation of the partnership, there’s a set procedure to follow. 

Without this agreement, the first step is to evaluate the value of the company. This helps everyone understand what their interests are worth. Then, it’s possible to negotiate who buys out who and the specific terms. 

Again, it’s a good idea to have legal counsel work through this process with you. Your civil attorney is there to protect your interests. 

#6 Freeze-Out Merger

When the interests of business partners aren’t equal, a majority owner has the option to “freeze out” a minority owner through a merger with a new company. This forces the minority owner out of their ownership. However, it does provide them with the fair market value of their interests. 

This process is governed by statute and court opinions. As such, it is crucial to work with a business lawyer who has experience with the process. 

#7 Bankruptcy

Unfortunately, but unsurprisingly, many people try to resolve a partnership dispute in the midst of dire financial situations. When liabilities exceed the assets of a company, it becomes insolvent. 

Instead of wallowing in debt that mounts overtime, an insolvent business can file for bankruptcy. This allows the business to restructure the debt and continue to operate in certain situations. At other times, it results in the liquidation of the business. 

Either way, it is important to work with an experienced civil attorney in order to navigate the bankruptcy code. 

Do You Need to Resolve a Partnership Dispute?

Any business partnership faces a dispute at some stage. However, when these disagreements grow out of hand, it’s important to understand your position fully. When you work with an experienced attorney, you have counsel to examine your agreements and provide guidance. 

Whether you decide to work through the struggle or need to go to court, the attorneys at Nguyen & Chen are ready to help you protect and pursue your best interests. To learn more about your options, book a free consultation with our team today.