How to Handle 50/50 Partnership Disputes in New York

By James Woods
Managing Partner
how to handle 50 50 partnership disputes

Business partnerships, especially 50/50 arrangements, often begin with great optimism and shared visions for success.

Partners typically enter these agreements with mutual trust, complementary skills, and a common goal of growing their business.

However, even the most promising partnerships can encounter serious disputes, which are an all too common and painful reality for many businesses.

Addressing issues promptly can prevent escalation and ensure the long-term success of the partnership. For business owners seeking advice on how to handle disputes in a 50/50 partnership, exploring various resolution methods is essential to finding a balanced and effective solution. 

Unfortunately, partners in a 50/50 arrangement may not be aware of the various legal rights and remedies available to them when facing a dispute. At Woods Lonergan PLLC, our New York City business attorneys have worked with partners, shareholders, and executives for over 30 years to efficiently resolve conflicts when the goals of the owners no longer align.

Learn how our experienced New York City business dispute lawyers can assist you by calling (212) 684-2500 or filling out our online form today.

Common Partnership Disputes

Partnership disputes can arise from many issues, often stemming from differences in opinions or expectations, as well as more serious breaches.

They include instances such as:

  • Misunderstandings or lack of clear communication;
  • Personal matters or conflicts that spill over into the business relationship;
  • Financial disagreements, such as conflicts over profit sharing, capital contributions, and expense allocations;
  • Disputes about the direction of the business, strategic initiatives, and daily operations;
  • Conflicts over perceived imbalances in effort, responsibility, and contribution among partners; 
  • Breach of contract, where a partner violates a term in the partnership agreement or other related contracts, such as employment, confidentiality, non-compete, or operating agreements;
  • Breach of fiduciary duties, which are obligations to act in the best interests of the partnership and other partners, typically categorized as duty of care, duty of loyalty, and duty of candor; and
  • More severe issues like theft, fraud, or misconduct by one or more partners, members, or shareholders, such as misappropriating company funds, assets, or partnership opportunities, competing with the partnership, and/or having an adverse interest.

Understanding these common sources of conflict can help partners anticipate potential issues and address them proactively, potentially even identifying grounds for suing a business partner if disputes escalate beyond resolution.

Partners in a 50/50 arrangement may not be aware of the various legal rights and remedies available to them when facing a dispute. These can include direct and indirect damages, injunctions, restitution, rescission, legal fees, and other appropriate remedies as provided under New York law.

At Woods Lonergan PLLC, our experienced attorneys have worked with partners, shareholders, and executives for over 30 years to efficiently resolve conflicts when the goals of the owners no longer align. Contact our offices today to speak with a member of our legal team.

Partnership Agreements

A partnership agreement is a legally binding document that outlines the terms and conditions of a business partnership. It typically includes details such as each partner’s roles and responsibilities, profit-sharing arrangements, decision-making processes, and dispute-resolution procedures.

A well-drafted partnership agreement can serve as a roadmap for resolving disputes by specifying procedures for resolving disagreements, such as through mediation, arbitration, or litigation. Additionally, the agreement can outline the process for buyouts or the dissolution of the partnership if the partners cannot resolve conflicts amicably.

By having clear guidelines in place, a partnership agreement can help partners navigate disputes more effectively and protect the interests of all parties involved.

Why Can a Dispute End a 50/50 Partnership?

A partnership dispute can end a 50/50 partnership due to the inherent challenges of equal decision-making. Disagreements on critical issues such as business direction, finances, or management can lead to deadlock, where neither partner can move forward. This impasse can erode trust and communication, making it hard to resolve differences.

Additionally, personal conflicts or differing visions for the business can strain the partnership. Without a mechanism to break ties or a shared commitment to finding solutions, partners may see dissolution as the only way to end ongoing conflicts and protect their interests.

In a 50/50 partnership, a dispute can be particularly challenging to resolve because there is no majority partner to break a tie in decision-making. Deadlocks can occur when neither partner can make a decision without the other’s agreement, leading to a stalemate in the partnership’s operations.

If the deadlock persists and cannot be resolved through negotiation or mediation, it may result in the partnership’s dissolution.

Communication is key. A breakdown in communication between partners can make it difficult to run the business effectively. If partners no longer trust each other or cannot communicate effectively, it can lead to irreconcilable differences that may result in the partnership’s dissolution.

In New York, if partners cannot resolve their disputes and continue operating effectively, they may choose to dissolve the partnership, sell their interests to each other or a third party, or seek court intervention through a 50/50 partnership lawsuit.

Resolving a Partnership Dispute

When deciding how to get rid of a 50/50 business partner in New York, the parties can choose from different methods, each with its advantages and considerations.

Mediation 

Mediation is a voluntary and confidential process in which a neutral mediator helps the parties negotiate a mutually acceptable resolution. It can preserve relationships and is often faster and less expensive than litigation. However, its non-binding nature means either party can walk away without a resolution.

Arbitration 

Arbitration is typically a more formal process in which an arbitrator or panel hears evidence and makes a binding decision. It can be quicker and more flexible than litigation, but the process is less transparent. The decisions are final and generally not subject to appeal.

Litigation

The most formal and traditional method involves filing a lawsuit in court. Litigation offers a structured process with clear rules.

When other resolution methods fail, it can be a powerful tool to resolve 50/50 partnership disputes. By filing a lawsuit in court, partners can access a structured legal process with clear rules and procedures.While litigation can be complex, it provides a powerful tool for resolving disputes and achieving a fair outcome.

Contact Woods Lonergan PLLC

Partnership disputes can destroy personal and business relationships alike. If you are facing a partnership dispute and don’t know where to turn, contact us to discuss your options.

Experienced attorneys can streamline the process and ensure that your rights and interests are vigorously protected throughout the proceedings. At Woods Lonergan PLLC, our legal team has deep expertise in a wide range of businesses and industries across New York.

We understand the unique challenges and complexities that our clients face in their respective fields. Learn how our experienced New York City 50/50 partnership dispute lawyers can assist you by calling (212) 684-2500 or filling out our online form today.

Woods Lonergan PLLC represents business owners in their partnership dispute claims throughout New York, including Manhattan, Brooklyn, Queens, Bronx, Staten Island, Nassau, Suffolk, and Westchester Counties.

About the Author

James Woods, Managing Partner of Woods Lonergan, holds more than 25 years of experience in corporate, real estate, and business legal matters. His expertise in handling negotiations, litigation, jury trials, and all forms of alternative dispute resolution spans multiple areas, including corporate, real estate, and commercial litigation. James actively represents dozens of Cooperative and Condominium Boards and serves as counsel to many Corporate Boards. Prior to founding the firm, James proudly served as an Assistant District Attorney for Nassau County and handled both jury and bench trials. With experience that also covers sophisticated transactions and complex acquisitions, James also serves as counsel to several domestic companies in a range of industries and commercial arenas, including real estate, insurance, banking, transportation, and construction. If you have any questions about this article you can contact attorney James Woods through his biography page.

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