Partnership Disputes

Partnership disputes create discord among the members of an enterprise and have the potential to paralyze its operations. Business litigation lawyer Steve A. Buchwalter provides dedicated representation for individuals and entities in Orange County and surrounding areas. He has more than 20 years of experience advising and advocating for clients who are facing disputes related to their enterprise.

A partnership is a business owned by two or more people. Partnerships are formed with the best of intentions, but the very nature of a partnership can often give rise to disputes. Each partner contributes to the various aspects of the business, such as funds, labor, and skills, and shares in the profits or losses.

Two common types of partnerships are general partnerships and limited partnerships. In a general partnership, the partners share equally in the management and obligations of the business. In a limited partnership, a general partner will own and operate the business, while a limited partner has a more passive role as an investor. In other words, a limited partner has no control over the business operationsand is not subject to the same liabilities as a general partner.

California law does not require any specific act or written agreement to form a partnership. The state has adopted the Revised Uniform Partnership Act. Under its default rules, each partner has an equal share in the management, operation, and profits or losses of the business. Partnerships disputes can arise under a variety of circumstances, including arguments over the direction of the business, personality clashes, and declining revenue and partnership funding. Two common sources of partnership disputes are the partnership agreement and misconduct by a partner.

Disputes in partnerships can often be traced to poorly planned roles of the partners. While it may not be required under California law, it is in the partners’ best interest to enter into written partnership agreements. A partnership agreement spells out the terms of the partners’ business relationship, including their rights and obligations, control, and management structure. In some cases, a partnership agreement does not adequately address the roles of the partners, their relationship to each other, or the operations of the partnership, all of which can lead to disputes.

Conflicts also can arise when a partner breaches his or her fiduciary duty to the partnership. A partner’s fiduciary duty includes a duty of confidentiality, a duty of loyalty, and a duty to act in the utmost good faith and fair dealing. A partner may breach this duty when, for instance, he or she learns of a business opportunity through his or her role as a partner, and takes advantage of the opportunity for personal gain without first receiving the consent of the other partners. Other forms of partner misconduct can include fraud and mishandling or misappropriation of assets.

Depending on the nature of the dispute, some partners can resolve their issues amicably, but this is not possible in all cases. A partner may consider initiating a lawsuit against the other partners. Mediation or arbitration can also provide a less costly and faster way of resolving the matter, particularly if the partners want to continue with the enterpise.

If the partners are unable to come to a resolution, they may consider dissolving the entity. They can agree to end their partnership voluntarily, in which case they would need to address issues such as notice to creditors, vendors, and customers, as well as distribution of assets. A partner may also ask a court to dissolve the partnership. The court will typically order an accounting and division of assets and liabilities. If there is alleged misconduct by a partner, the court may appoint a receiver to manage the business during the dissolution process.

Knowledgeable civil litigation attorney Steve A. Buchwalter represents clients throughout Los Angeles County and the surrounding areas in partnership disputes. With his focus on business and securities law matters, he has helped individuals and businesses resolve disputes in hundreds of cases. He can evaluate your case and represent you if you decide to take legal action. Call us today at (818) 501-8987 or contact us through our online form for a consultation.