Have you found yourself in a major dispute with your business partners about your company’s operations or allegations of misconduct? If so, you know that your business’s growth and reputation are on the line, and that time is of the essence. Don’t let a dispute escalate to the point that a positive resolution becomes impossible. Instead, contact SBS Law PLC for an initial case review with a knowledgeable Grand Rapids business lawyer. We’ll discuss how we can help you seek a positive outcome that best protects your rights and interests.
Common Causes of Partnership Disputes
The seasoned commercial business lawyers with SBS Law PLC have helped owners in partnerships resolve a wide range of legal or financial disputes, including:
- Alleged breaches of fiduciary duties: Partners typically owe fiduciary duties to each other and to the partnership, such as the duties of loyalty and good faith. A partner breaches their fiduciary duties when they engage in self-dealing, diverting business opportunities, misusing company funds, or failing to disclose conflicts of interest when participating in decision-making.
- Disagreements over profits or contributions: Conflicts may arise over whether to distribute, retain, or reinvest company profits. Partners may also dispute whether to initiate a capital call or whether a partner has contributed adequate capital, given their ownership interest.
- Decision deadlocks: Partnerships that have an even number of partners or vote by ownership percentage may reach a deadlock on operational or strategic decisions, leading to disputes if they do not also have a method of breaking a tie vote.
- Alleged mismanagement or misconduct: In partnerships where certain partners hold management authority or specific management roles, a partner may face allegations of negligent management or intentional misconduct, such as misappropriation of company funds or assets.
- Alleged oppression: A partner may claim that a majority partner or a faction of partners has engaged in oppressive tactics, such as withholding information about the business, blocking the partner from participating in decision-making, or forcing the partner to sell their interest for less than fair market value.
- Voluntary withdrawal or forced expulsion: Partners may dispute the valuation of their company or legal procedures when one partner wishes to withdraw from the partnership, or when a majority of the partners seek to expel one or more other partners.
How Partnership Agreements Affect Disputes
Most partnerships have a written partnership agreement that governs the rights and responsibilities of the partners among themselves and to the partnership. The provisions of the partnership agreement can determine partners’ rights, responsibilities, and options in the event of a dispute. For example, a partnership agreement can:
- Specify voting policies or procedures for breaking voting deadlocks in the event that partners reach an impasse over operational or strategic decisions
- Include voluntary withdrawal procedures that establish a method for valuing a withdrawing partner’s interest
- Provide protections against deadlocks or partners facing a force-out, such as “shotgun” provisions that encourage fair-market-value offers for the partners’ interests
- Help resolve disputes over profit distributions or capital contributions by setting specific requirements for distributions, such as mandatory distributions to cover partners’ tax liabilities, or capital calls
In the absence of a written partnership agreement, the outcome of a partnership dispute can depend on state laws, including the Michigan Uniform Partnership Act. The Act provides default governance rules for partnerships, such as requiring equal sharing of profits and losses or shared management rights for general partners.
Legal Remedies and Resolutions in Partnership Disputes in Grand Rapids, MI
Business partners involved in a legal dispute may pursue various remedies to resolve the dispute. Our lawyers can help you explore options such as:
- Accounting: State law gives partners the right to obtain an accounting of partnership transactions. As such, a partner may file a legal action to compel the partnership to produce an accounting or allow the partner access to the company’s books and records.
- Injunctive relief: A partner may seek injunctive relief from the courts to pause or preclude a decision or transaction that has created a partnership dispute. For example, a court may declare a company governance decision made by certain partners as void for violating the partnership or state law. Alternatively, the court may freeze partnership assets to prevent partners from improperly transferring them out of the business.
- Compensation claims: Partners may pursue legal action to recover compensation from other partners for losses to the partnership resulting from breaches of fiduciary duties, waste of business assets, or misappropriation of company funds.
- Business divorce: Intractable conflicts between partners may lead them or the courts to seek a “business divorce,” which may involve a partner or a faction of partners buying out the others through a negotiated or court-directed transaction, or a judicial dissolution of the partnership.
- Receivership: Sometimes, the partners’ deadlock makes it impractical for them to continue operating the business or wind down the partnership in an orderly manner. In such cases, a court may impose a receivership on the business, appointing a neutral third party to take certain actions on behalf of the partnership, such as managing the business pending resolution of the partners’ dispute or handling the wind-down and dissolution of the business.
An experienced business attorney can walk you through the available options in your partnership dispute to help you develop a strategy focused on helping you secure a fair and favorable resolution.
Litigation vs. Alternative Dispute Resolution
In some cases, partners may resolve disputes arising from their business through alternative dispute resolution rather than resorting to litigation. Many partnership agreements include mandatory alternative dispute resolution provisions requiring partners to submit disputes to good-faith mediation or binding arbitration. Even when partners do not have a mandatory alternative dispute resolution obligation, settlement negotiations, mediation, or arbitration offer a way for them to resolve their disputes more quickly and at a lower cost than litigation, while allowing partners to keep their disputes private to avoid harm to professional reputations.
Why Choose a Business Lawyer from SBS Law PLC?
You’ve worked hard to build your partnership into a successful business venture. Don’t let a partnership dispute put all that effort at risk. Instead, turn to a business entity attorney from the Grand Rapids, MI, law firm of SBS Law PLC because:
- We’re committed to results: Our attorneys understand that every case we handle affects our clients’ businesses and personal lives. We take our responsibilities to our clients seriously and believe they should never feel left in the dark. Our legal team will always be available to speak with you, explain your legal options clearly, and work diligently to secure the positive results you deserve.
- We understand the law inside and out: Our lawyers’ experience spans multiple areas of law, allowing us to anticipate how a client’s matter may affect various aspects of their business or affairs. We take a holistic approach to legal representation, pursuing strategies tailored to your immediate needs while also considering your long-term future.
- We’re here when you need us: Our law firm serves clients in Grand Rapids, Kalamazoo, and throughout Michigan. Our attorneys can help you with local or statewide matters.
Contact Our Law Firm Today for Counsel and Support During a Partnership Dispute in Grand Rapids, MI
A partnership dispute can cost you significant time and money, creating a distraction or obstacle to your company’s operations, and potentially jeopardizing its success. Fortunately, you don’t have to resolve the matter on your own. Contact SBS Law PLC today for a confidential consultation with a Grand Rapids partnership disputes attorney from our law firm, and get trusted, responsive legal advocacy that’s driven by the results you want.
