Breaking Up is Hard to Do
Partnerships are the efforts of each person contributing equally to help the business to grow. It starts with a shared vision that divides the labor and makes performing various tasks more manageable.
Problems arise when one business partner fails to live up to their obligations. It does not matter if you work with a family member, friend, or colleague; a strong relationship is critical for success.
Sometimes conflicts arise, and the instability makes it harder for the business to grow. You are unsure what to do and suspect the other partners could be considering legal action against you. The odds increase of your facing legal action from disgruntled business partners.
A Partnership Agreement is Critical
The first thing you want to review is your partnership agreement. It addresses dispute resolution and could limit your partner’s ability to file a lawsuit. For example, some partnership agreements have arbitration and mediation clauses that require using these dispute-resolution procedures. In this case, all business partners give up their right to take legal action without going to dispute resolution first.
What If You Don’t Have a Partnership Agreement?
In Texas, situations without a partnership agreement fall under Texas partnership law. It governs instances where there is no clear conflict-dispute mechanism. Under the law, partners have various rights, including:
- The right to file a claim of breach of the partnership agreement.
- The loyalty of care. The loyalty of care is a fiduciary duty that business partners have to each other. It requires them to engage in actions that put the interests of the other partners and the business ahead of their own. Any partner that violates this provision of the law could be sued.
- The enforcement of the partnership agreement. The courts could order rogue partners to honor their commitments.
You can seek damages against your partner, including monetary damages, an injunction, or business dissolution. We recommend speaking with a skilled attorney about your case. We will review your options and the strategies you can use. Time is of the essence in these cases; the sooner you speak with an attorney, the sooner your rights can be protected.
Grounds for Suing a Business Partner
In Texas, business partners can sue each other for various reasons.
- Breach of the partnership agreement: Partners have the right to sue for breaching the partnership agreement. These include failing to act in good faith, not meeting obligations, and violating provisions of the contract.
- Breach of fiduciary duty: Business partners owe each other a duty of care and loyalty. Everyone must act in the best interests of the business. These duties include failing to execute reasonable care and putting themselves ahead of the company. The other business partners can sue for failing to act responsibly and with care.
- Misrepresentation or fraud: Partners can sue for making false statements or concealing critical information. For example, you can take legal action if your business partner fails to tell you they were in prison for ten years. These statements are material and impact your decisions. The wrong information or not disclosing the truth is attempting to conceal and engage in misrepresentation or fraud.
- Conversions: Business partners cannot use the funds and assets of the business for their personal use. Everything must be for legitimate business purposes. Conversion is taking a business’s assets and converting them to your own, such as transferring an asset into your name.
- Control over the partnership assets: Partners can sue each other for misallocating the profits or distribution of assets.
- Business torts: Your business partner can sue you if you engage in behavior that is harmful to their reputation, relationships, and contracts. Each business partner should act professionally and avoid engaging in destructive behavior.
These are some of the grounds for suing a business partner. We recommend speaking with a skilled attorney who can evaluate your situation and discuss the various options to protect your rights.
Can Business Partners Sue Each Other?
Partnerships are regulated by the laws of the states where the business was formed. These laws establish a framework for resolving disputes between partners.
Partners have the right to sue each other for breach of fiduciary duty, fraud, breach of contract, misrepresentation, and conversion. For instance, one business partner might sue another for breach of fiduciary duty if they engaged in actions to harm the business. These could include taking expensive vacations, lavish personal spending sprees, and misusing the business’s funds, credit, and assets.
We recommend considering the potential consequences of filing a lawsuit against your business partner. Litigation is time-consuming, costly, and could damage your relationship with the other partners. Using alternative dispute resolution, such as arbitration or mediation, is advisable before turning to litigation.
Partnership agreements will frequently include dispute-resolution mechanisms. These limit your ability to sue and require you to use alternative dispute resolution. We recommend reading your partnership agreement and consulting with a skilled attorney. Our team will review your situation and discuss the different options we can pursue. We seek your best interests to prevent you from making critical mistakes.
Why Choose Us?
Issues with business partnerships are complex and require a skilled attorney to guide you. The state has laws governing how to address disputes, but you could also agree to use alternative dispute resolution.
Your attorney will review your partnership agreements and discuss your goals. We will create a customized legal strategy that takes into account your situation. Our team is results-oriented and will only stop once we create favorable results for you.
The Weisblatt Law Firm is here for business owners who need help with rogue partners. You will work with a skilled attorney who listens and guides you. We have many options we can pursue and will give you objective advice, laying out the pros and cons. You get complete information to make the best decisions regarding your life.
Separating from a business partner is complex and requires the knowledge of an experienced attorney. We have decades of experience working on these cases. Our skilled attorneys will help you make the best decisions and ensure you follow the law’s different provisions. You will understand the possible outcomes and consequences, so you make the best choices for your business.
The Weisblatt Law Firm has decades of experience in handling these cases. You work with an attorney that cares and guides you through the process. We give you practical and objective legal advice that protects you. Contact us at (713) 666-1981 to speak with a skilled attorney about your situation.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
