Shareholder and Partnership Disputes

Corporations, limited liability companies and partnerships are legal structures created for the operation of a business. Underlying these legal entities are people agreeing to work together under certain terms and conditions to create opportunity to make money and live out the American dream. Business organizations function as well as the people whom operate and control them. Most businesses do not survive the first five years and this is caused by many factors, the most common of which is that the people controlling the operations either do not comply with operating agreements or, more often than not, there was never a formal written agreement between the business owners.

Many times, there is the person who brings to the table the money or customers, and the person or persons who know the inner workings of the operation. Initially, this is a marriage made in heaven – but underlying this arrangement are unforeseen issues. Additionally, the rose-colored glasses worn at the beginning of a business arrangement fail to see glaring personality conflicts, unrealistic timelines for becoming profitable, or the cost estimates for business operations were too conservative.

Investing into a business operation, especially investments for stock or equity in a privately held entity, is essentially an investment into the relationship between the people running the organization. Agreements are only worth the paper they are printed on, it is the people standing behind that paper that make the difference. Investing into private stock or equity relies heavily on being presented with accurate information.

In our practice, we have seen business disputes for failure to pay commission splits, mismanagement of money, taking cash out of the proverbial cash register, substance abuse issues, cooking the books or a partner simply disappears. In some cases, there is a genuine dispute between good people regarding legitimate questions related to business operations.

Unfortunately, most of the business disputes we handle relate to one of the parties becoming the bully of the business. It is their way or the highway. They are usually the ones with “deeper pockets” and are already lawyered up to silence any opposition. Bullies do not discriminate, and anyone can become a victim. Business disputes usually happen with one party taking advantage a little at a time and the wrongful conduct becomes the normal operating procedure. Victims of business disputes have a tendency to be pushed out of the business over time – even when they are the ones holding the keys to the kingdom in the form of stock, intellectual property or industry knowledge. There is never enough giving and the business bully usually makes poor decisions based upon greed and a quest for more of everything. If you are being bullied, you are not at fault and you are not alone.

There are a thousand reasons for business disputes to arise. For each reason, there are laws to protect a partner, shareholder or investor from being defrauded or by a breach of trust or breach of contract. Each situation is unique and requires careful analysis and application of different legal tools. In some instances, we encourage our clients to have a trusted third-party attempt to resolve a difference of opinion between partners. In others, the business dispute may require an outside consultant to provide advice as to how to make the business run smoothly and efficiently.

By the time you are looking for a lawyer to handle a business dispute, you are usually past trying to amicably work things out and there is substantial money or property missing. In this case, we believe it is time to stand up for yourself and we are here to support you. We are heavy-handed in our pre-suit reconnaissance and believe information is the key to gaining the upper hand in any business dispute. Our unorthodox approach to investigations is directed at making a meaningful attempt to resolve the case before it even gets filed and becomes a matter of public record. In many instances, business bullies do not want to be exposed for fraud and become willing to resolve matters when presented with evidence of wrongdoing in a business dispute.