Partnership Dispute Lawyer Near Toledo, Ohio

Sawan & Sawan - Local Family-Owned Toledo Law Firm

Ohio Partnership Dispute Lawyers

There are specific laws that govern all partnerships depending on what State is involved. While most states have their own statutes governing partnerships, where there is a partnership agreement in place, the agreement usually takes precedence. Many states have adopted the Uniform Partnership Act which is a common set of default rules for partnerships. Even where this is true, the partnership agreement can modify any of these rules. There are additional legal concepts that apply to partnerships irrespective of the partnership agreement such as fiduciary duties that partners owe each other and the business. These are typically based on any particular State common law. When a dispute between partners arises, a number of considerations come into play. 

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Common Causes of Partnership Disputes

The most frequent claims in small partnerships resolve around contract breaches. These claims center around ownership, management duties, decision-making, profit allocation, and compensation. Breach of fiduciary duties exists when one partner breaches her duties to the partnership. Self dealing, lack of loyalty, or failure to act in the best interest of the partnership, are just a few examples of breach of fiduciary duty. Fraudulent activity will also lead to fiduciary and contract breach actions. Lack of clear roles and responsibilities, misunderstood goals and expectations, financial disputes, communication failure, and misaligned contributions or efforts can all lead to partnership disputes.

Partnership Agreements

Partnership agreements can help prevent disputes by outlining the voting power and procedures to help make decisions if partners are not in agreement. It can also provide for remedies that could deter significant disputes such as dissolution procedures during gridlocks. If the roles and voting power of the partners is specifically outlined, even where partners disagree, the agreement itself helps them come to a decision and move forward. A partnership agreement can be modified to address disputes. The partners can agree to amend the original agreement. This would require discussing and changing specific terms or clauses to address any disputes. The partnership could add a dispute resolution clause that would use either mediation or arbitration to resolve conflicts. This would cost much less than litigation. The partners can more clearly identify the roles, responsibility, and decision-making process to minimize misunderstandings. They could clarify effective communication parameters which would include regular meetings. To prevent disputes with distributions, partners can revisit how the distributions are determined. They can also revisit an exit strategy for both voluntary and involuntary termination.

Resolving Partnership Disputes

If the partners ultimately cannot agree, there are a number of legal options to resolve the dispute. Mediation is one of these options and is commonly pursued. A mediation is where a neutral third party (mediator) meets with the parties and stakeholders to encourage a discussion and help them reach a mutually agreeable resolution. If mediation is unsuccessful, some partnership disputes will need to be resolved with a more formal process. This can include arbitration where the agreement calls for it, or litigation where the dispute is brought before the applicable court. At any point, the parties may enter their own settlement.

Partnership Dissolution

If the partners are not in an agreement about dissolving the partnership, there are a few options. One common option is a buyout agreement where the partners who wish to leave can offer their interest in the partnership to the remaining partners at a fair price. This avoids protracted litigation which can end in dissolution due to the inability for the partners to agree. The partners can also consider mediation or arbitration short of litigation to see if a resolution can be found. If these options are not successful, the partners typically need to involve the court and seek a judicial dissolution or other remedy depending on the facts of the case.

Damages in a Partnership Dispute

There are major financial implications to resolving partnership disputes. Major money damages can be awarded for a partner’s misconduct. These damages can cover economic loss due to the dispute which can include both compensatory and liquidated damages. Disputes stop business operations. A quick resolution will minimize those disruptions. Litigation is expensive and can affect the partnership finances. Mediation or arbitration, although less expensive, will still affect the partnership’s bottomline. Once resolved, however, the partnership can move forward in its business operations. Quickly resolving the dispute will minimize the financial impact.

Do I Need a Lawyer for a Partnership Dispute?

Lawyers and mediators are crucial in assisting partnership disputes. A lawyer provides legal advice to assist the partnership and help in avoiding conflict. Lawyers can draft and review all partnership contracts ensuring compliance with all laws and providing clarity. A lawyer can resolve disputes through mediation, negotiations, or if necessary litigation and can also assist the partners to enforce the partnership agreement and fiduciary responsibilities. A mediator is an impartial third party who can facilitate disputes between the parties. Through communication, they find ways to resolve partnership differences while finding solutions. Mediators assist in maintaining the partnership relationship during conflicts. Mediation is also less expensive than litigation.

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Dennis P. Sawan

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Chris Sawan

Partner

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