Common Types of Partnership Dispute Cases in Maryland

Operating a partnership can be stressful. Differences in opinion, different business strategies, and simple disagreements can lead to disasters with businesses. If one partner runs into financial hardship, the entire partnership can face problems. Disputes and corporate litigation can often result from these kinds of problems. The Baltimore business litigation lawyers at the Heyman Law Firm discuss some of the most common ways partnership disputes happen.

What Are the Most Common Causes of Partnership Disputes?

The phrase “partnership dispute” encompasses any legal disputes or disagreements between business partners. Business partners have different rights and obligations to the partnership depending on the type of partnership. Some of these disputes may be specific to certain kinds of partnerships, but many of them are general disputes that any partner may face. The following are all common types of partnership disputes:

Managerial Disagreements

When a business is operating as a partnership, each partner usually has a say in how the business operates. Day-to-day decisions can be made by any partner. A partner usually has full authority, for instance, to purchase supplies or manage minor issues. Bigger matters are usually decided by a majority and issues that strike at the heart of the partnership must be decided unanimously.

Major disagreements regarding how to administer the partnership should be voted on by all partners in accordance with the terms of their partnership agreement. If you have an odd number of partners, many issues can be resolved by a simple majority; however, resolving serious issues requiring an amendment to the partnership agreement or core structure of the business must be agreed to by all partners, which can result in deadlock and significant delays in your business operations. Talk to a business advisory attorney for help understanding your legal options.

Dissolution

Depending on the type of partnership, partners may be unable to step away from the partnership without disbanding the partnership entirely. Some partnerships allow others to step into the shoes of a partner and permit the partnership to remain even after a partner dies or leaves the partnership.

When a partner wants to step away from the partnership, the other partner(s) may be face financial harm or ruin if the partnership’s business operations fail under the stress of the dissolution. This is especially common when a partnership’s assets and operations cannot be easily transferred to another entity formed by the remaining partners. A business formation attorney can help ensure that your partnership or other business entity has the resources and options to buy out a partner instead of dissolving.

Liability

In many partnerships, all partners share things equally, including liability. Defaulting on a loan, committing negligence, or mismanaging business funds can make any partner responsible for the monetary damages stemming from the partnership’s errors. Thus, if one partner approved a negligent decision, another partner could be sued for the harm caused under “joint” and “several” liability rules.

When you face liability for your partner’s negligence or fraud, you may be forced to pay damages at first. If your partner is available, you may be able to join them in the lawsuit and the court could decide that they should pay the damages. If you are unable to bring your partner to court during the initial lawsuit against your partnership, you may be able to subsequently sue him or her for reimbursement. In this way, innocent partners may be able to avoid the harm caused by their partner’s negligence.

Agency

All partners in a general partnership are considered agents of the partnership, which allows them the authority to make many decisions without consulting other partners. Forming a limited partnership may mean that some partners have no authority to manage the partnership or make decisions and deals on behalf of the partnership; they function solely as silent partners.

As mentioned, unilateral decision-making authority only exists for certain types of decisions. Small, day-to-day decisions can be made without consulting other partners whereas more important decisions require a majority of the partners and extraordinary decisions require unanimous agreement.

When a partner oversteps their authority, the partners may seek the court’s assistance in eliminating the harmful partner from of the partnership, alter the partnership’s business model, or dissolve the partnership and re-form it as a different type of entity.

Baltimore Business Litigation and Dispute Attorney

If you have problems with your business partner or your partnership suffered harm because of a decision they made, contact our Baltimore business litigation attorneys. The Heyman Law Firm’s attorneys are available to help you with your partnership dispute case. To schedule a legal consultation with our attorneys, contact our law offices today.