Disputes are inevitable in business partnerships. One of the best ways to avoid disputes over partnership agreements is to set expectations from the beginning. It’s also essential to have a clear agreement on how to handle the disputes. Business partners have fiduciary duties and obligations to each other and their business. Partnership disputes can result in lost profits and, in serious cases, the breakup of a partnership.
Discuss Your Case With an NYC Partnership Agreements Attorney
If you are forming a partnership, facing a dispute, or you have questions about your partnership agreement, Woods Lonergan can help. Don’t let a dispute over the partnership agreement harm your business. Our New York City business contracts attorney has handled many partnership agreement cases in pre-litigation negotiation and in litigation. We will work diligently toward the best outcome in your case. Contact Woods Lonergan today to schedule your initial consultation.
How a Partnership Agreement Attorney Can Help
Working with an experienced attorney can help you at all stages of the partnership agreement process. If you are considering forming a partnership, an attorney can help you draft an effective partnership agreement. You may not anticipate any potential disputes with your partner, but a partnership agreement should anticipate disputes and address how they should be resolved. At Woods Lonergan, one of our business attorneys can meet with you and learn more about your goals and needs. We can draft a partnership agreement that protects you and your interest and is legally enforceable in New York.
Provisions in the partnership agreement can effectively resolve many issues relating to partnership disputes. However, if there is no partnership agreement or the agreement doesn’t address the issue you’re facing, you need an attorney to represent your interests. It’s wise to consult with a knowledgeable business attorney when partnership conflicts arise. The skilled partnership agreement attorneys at Woods Lonergan have years of experience helping New York businesses with all types of partnership disputes. We can help you develop an effective legal strategy and ensure your rights are protected.
Drafting Partnership Agreements
Beginning with a solid partnership agreement is one of the best ways to avoid partnership disputes down the road. Even if you were entering into a partnership with a family member or friend, it’s wise to start with a written partnership agreement. Drafting a partnership agreement isn’t a sign of distrust, it’s a way for both partners to communicate clearly. As with any other relationship, communication and understanding each other’s expectations is critical.
When you create a partnership agreement, both parties will have a clear understanding of how they are to treat the assets, debts, and opportunities related to the business. The partnership agreement can also set forth how you will resolve conflicts should they arise. Many partnership agreements include arbitration or mediation provisions to resolve disputes. The partnership agreement should address:
- Rules for decision making
- How the profits and loss will be allocated
- What each partner will contribute to the partnership
- Each partner has responsibilities and authority
- How to resolve disputes
- How to divide the partnership if it dissolves
Breach of Fiduciary Duty in Partnership Agreements
Even if you have signed an effective partnership agreement, you may find yourself involved in a dispute and benefit from consulting a partnership dispute attorney. Breach of fiduciary duty is one of the most common partnership disputes. Business partners owe each other fiduciary duties of loyalty and good faith that they cannot waive. For example, business partners have a duty not to compete with their partnership, not to violate the law or engage in intentional misconduct, and not to act on behalf of adverse parties. Partners must account for profits and the use of partnership property to the partnership.
Additionally, partners cannot act with gross negligence or recklessness while conducting business on behalf of the partnership. When one or more partners breach a fiduciary duty, the other partners may be able to obtain an injunction from the court or recover compensatory damages. When the breaching partner willfully breached his or her fiduciary duties, the other partners may be able to recover additional punitive damages.
Expulsion of a Partner
In some cases, a partnership will become unworkable over time because of one of the partners’ actions or inaction. In these cases, the other partners can attempt to expel the problematic partner. Well-written partnership agreements will include a provision for how expulsion should be handled. Many partnership agreements will permit the expulsion of a partner in one or more of the following situations:
- Breaching the partnership agreement
- Filing for bankruptcy
- Being charged with or convicted of a crime
- Engaging in professional misconduct
- Failure to carry out obligations under the partnership agreement
Disagreements About Running the Business
As a business grows, disputes can arise between the partners about how to conduct the business. Some of the most common disputes include:
- How to use the partnership’s resources
- Who has the authority to make decisions
- Disputes over business decisions
- Disputes over which opportunities the partnership should take
- Disputes over how to use the business’s profits
Breach of Contract with a Partner
Business partners will need to enter into various types of agreements to govern their business. For example, they may need to draft employment agreements, partnership agreements, non-compete agreements, and non-disclosure agreements. If a partner violates the terms of an agreement, the other partners may have a right to bring a breach of contract claim against him or her.
Breakup of the Partnership
There are many factors that contribute to the breakup of a partnership. Sometimes partnerships break down due to conflict and disagreements. Other times, one partner would like to withdraw from the business. a partner may retire, pass away, or terminate when a set term expires. No matter the reason for the dissolution, the termination of a partner can give rise to various disputes.
Contact Our New York City Partnership Agreements Attorney Today
The best way to prevent a partnership dispute is to negotiate and draft a clear partnership agreement. Partnership disputes can still happen, even when both parties have the best intentions. Whether you need legal assistance drafting a strong partnership agreement or are already involved in a partnership dispute, our New York City business litigation attorneys can help. Contact us today to schedule your initial consultation.