Litigating Business Partner Disputes for Arizona Small Businesses

Arizona Business Partner Dispute Attorney

Not all business partnership disputes are avoidable. Small business owners can find conflict with their business partners for a number of reasons, including: 1) change in vision of the company’s direction, 2) change of health circumstances of one of the partners, 3) varying risk tolerances of the business partners, 4) differing opinions on whether to reinvest company profits or to take distributions, 5) feelings of (or actual) improper spending by a business partner, 6) disagreement on hiring decisions, etc.

While some of these disputes can be resolved by direct communication with the business partner, it does not always work out that way. When you find yourself at odds with a business partner, then it is critical that you take steps to protect your interests in the company. Here are some of the proper steps.

1. Meet with Legal Counsel 

The first steps you take when a business partnership dispute occurs are the most critical. Oftentimes the partner who has control over the company’s assets and operations at the time of the dispute gains a decided advantage when negotiating with the other business partner in the aftermath of the dispute.

It is important to meet with proper legal counsel when deciding what steps you should take to put yourself in the best position moving forward with your partnership dispute.  

2. Create a List of Issues

When things are going poorly with a business partner, it can be difficult to take time to step back and actually write down all of the issues. However, it is important that you do this so you can accurately pinpoint the primary issues and understand what documents/records you need to prove what your partner’s is doing wrong.

It is also important to create a list of any potential issues that your partner(s) could say against you. This will help you understand what points of exposure you have. 

3. Legally Secure a Copy of Important Documents/Records

In many small business partnerships, there is a partnership agreement (or an LLC Operating Agreement) that spells out how things should go if the partners become adverse to each other. It is critical to have a copy of this document so you can make sure you comply with what the parties agreed to.

It is also important to gather copies of proper financial and accounting records that you are entitled to have access to. It can be tricky to determine what information you have rightful access to, so it is strongly suggested that you meet with an attorney to discuss what information you can/should have access to.

4. Prepare for Litigation 

The court is the only entity that will be able to tell your partner what to do or not do. Because of that, it is often necessary to get the court involved quickly when trying to resolve a heated partnership dispute unless the business partner is willing to do what you request (which is not likely because that is why you are having a business partnership dispute).

To pursue litigation, it requires basic information about the dispute, why you believe the other party has engaged in wrongdoing, and what you ultimately want the court to do. 

5. Keep the Business Going

While the stress of a business partner dispute can make the partners want to give up on the business, if it is viable business, then it is best to keep the business up and running. This will allow both partners to get the most value when it comes time to decide how the business should be split.

For example, the partners may decide to sell the business and split the proceeds or they may decide to sell the assets of the business and split the proceeds. When the business is not a going business concern, there is no value to the business and the assets are subject to fire-sale prices at an auction. This does not mean that keeping the business going is the right thing in every situation. 

Contact Counxel Legal Firm

We regularly assist business owners through their partnership disputes. Contact us at (480) 744-6621 or at request@counxel.com. Don’t forget to check out the good things that others are saying about the services they received from Timothy Coons on Google.

This article is intended for informational purposes only and does not constitute legal advice for your specific situation. Use of and access to this article does not create an attorney-client relationship between you and Counxel Legal Firm. Please contact request@counxel.com or (480) 744-6621 to request specific information for your situation.

*Conveniently located off the 101 Freeway and the US 60 in the middle of Phoenix, Scottsdale, Tempe, Chandler, Gilbert, Mesa, and Queen Creek!

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