So You Need to Sue Your Business Partner

When you go into business with one or more people, there is always a risk that the relationship will end badly. Whether you simply want to enforce your rights in the business or end it altogether, it is important to understand how the state law and internal documents affect your situation. It is especially critical to know how the form of your business may impact your ability to sue your business partners or enforce your rights if the need arises.

GOVERNING DOCUMENTS:

A business can take many forms. Statutes provide for forming limited liability companies, corporations, or partnerships. Regardless of the business form, hopefully, there is written documentation governing how the relationship between the respective owners and between the owners and the business will work, for example:

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  • A partnership agreement governs a partnership;
  • A limited liability company, whose owners are called members, is governed by an operating agreement;
  • A corporation, whose owners are called shareholders, is governed by bylaws or a shareholder or stockholder agreement; and
  • Statutory default provisions will also apply if the business does not have documentation outlining the business relationship.

REASONS FOR DISPUTES BETWEEN OWNERS:

Business lawsuits evolve for many different reasons and under many different circumstances. Still, they often occur when one owner feels there has been a violation of the governing agreement or they have been wronged in some way. An owner may also sue if he or she has reason to believe there has been a breach of fiduciary duty by the other owners, including the duty of loyalty, the duty of honesty, or the duty not to use business assets for personal use or that their reasonable expectations have been oppressed. Other causes for business disputes between owners deal with the misappropriation of business funds, the usurpation by one of the owners of an opportunity belonging to the business, or the request for a buy-out of the business. These disputes often depend on the particular business and the business relationship.

An owner may even sue to force a business dissolution in extreme cases. This typically happens when there is a deadlock under the applicable governing agreement, and the owners cannot decide how (or whether) to end the business.

Because there may be procedural requirements that must be met in these business disputes before commencing litigation and because this area of law can be complex, it is prudent to contact an attorney experienced in handling business disputes. These business disputes can be resolved in several ways, including negotiation, mediation, or litigation if necessary. We have experience successfully representing majority owners, minority owners, and businesses in these often complex disputes.

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