Partnership Disputes Attorneys in San Jose, California

Running a business is challenging. You never know when or where a dispute or disagreement may arise that makes operating the business difficult or even threatens to cause the business to cease operations.

When your business is a partnership, then the partners themselves can be the cause of the dispute that may end up in a dissolution of the partnership or the business altogether. That’s why it’s important from the very beginning to have a well-crafted partnership agreement in place that includes mechanisms for resolving disputes.

When disputes do arise among the partners – over management, money, company direction, or other issues – it is essential to resolve them so the business can continue moving forward. If discussions and negotiations among the partners reach a deadlock, then outside help should be called in. A mediator, arbitrator, or business attorney can help the parties move forward again.

If your partnership in or around San Jose, California, is facing a dispute that threatens operations, contact the business law attorneys at Mosaic Law, P.C. We have experience in handling complex disputes for businesses in diverse industry sectors, including Fortune 100 companies. We proudly serve clients throughout South County, the Santa Clara Valley, and the Santa Cruz Mountains.

Common Areas of Partnership Disputes

Perhaps topping the list of the origin of partnership disputes is money. One partner may be mixing personal and company business together, and the other partners object to that person’s misuse of company funds. Or, the company itself may be facing financial difficulties due to competition or a tightening market for their products or services. The partners might end up pointing their fingers at one another. One partner may also face personal financial straits and seek to recover his or her investment and move on.

Another common source of disputes is each partner’s role in the business. One partner may feel he or she is not being given enough authority or recognition, and their ideas are being overlooked. One partner or another may have ideas for management and the direction of the company that conflicts with the current operational direction, but the others are dead set on continuing in the current direction. There needs to be a clear separation of the partners’ duties from the beginning to avoid this.

Intellectual property (IP) could also be an issue, especially if one partner’s intellectual property is the basis for the whole operation. In that case, if the IP owner didn’t initially receive clear recognition in the form of documentation that he or she is the IP owner, then the partnership itself could become the legal owner in the eyes of the law.

The direction of the company can also be a source of disputes. Even if the business is doing well, partners can disagree and argue over what the next step should be: How do we take everything to the next level, expand, seek a merger or acquisition, or just continue as we are?

Legal Issues Involved

If the dispute isn’t resolved among the partners, the matter could end up in litigation such as a breach of contract or a breach of fiduciary duty. The latter could come into play if one party is mismanaging company funds for personal gain or just not showing enough fiscal responsibility by running up debts or failing to pay expenses.

A breach of contract might arise if the partners or one partner forge ties with outside suppliers or service providers and those suppliers or providers fail to perform as expected. This could be especially disrupting if one partner, or his or her family, is also the contracted supplier or provider.

Resolving Partnership Disputes

Disputes should be anticipated from the founding of the partnership with mechanisms for dispute resolution built into the operating agreement. These mechanisms can include third-party assistance such as mediation or arbitration, or in the case of a partner who suddenly wants out, a buy-sell clause.

The first recourse, naturally, is to try to resolve the dispute internally through negotiations among the partners. If this fails to resolve the situation, then a third party may need to be called in.

A mediator is a professional who will meet with all the partners, listen to their viewpoints and proposed resolutions to the dispute, and then draw up a resolution for the partners to consider. The mediator’s proposal, however, is not binding, and unless the warring parties agree to it, everything returns to square one.

Arbitration, on the other hand, is more like a trial, and the arbitrator or arbitration panel is more like a judge whose decision generally is binding. In arbitration, each side can present evidence and make oral arguments, but the standards of evidence are a bit looser than in an actual trial. After the arbitration process concludes, the arbitrator’s decision will govern matters going forward.

Litigation is always an option as well, and one partner may jumpstart the dispute and bypass alternative dispute resolution methods by filing a lawsuit. In that case, each side will need to retain legal counsel and representation, raising the stakes for all involved.

Revisiting the Partnership Agreement

As noted, disputes should be anticipated from the git-go with an ironclad partnership agreement that recognizes potential problems and addresses how they should be handled. If a dispute does arise, regardless of the strength of the original agreement, it may signal that it is time to revisit the document and amend, revise, or recreate it.

Whenever it comes to a partnership agreement, you need to rely on the advice and guidance of an experienced business law attorney, whether it’s in creating the original document or revising it. Just using a downloadable PDF and filling in the blanks could easily be the source of disputes as the partnership begins operations. You need everyone’s roles and responsibilities clearly spelled out, along with dispute resolution mechanisms outlined.