Engaging in a corporate partnership can have many rewards. However, if a business partnership begins to fail because of different management viewpoints or financial issues, the partnership may begin to crumble. It is important to think about the consequences of a business partnership failing instead of being unprepared if it happens.
If you are having a business partnership dispute that has turned ugly, you should consider speaking with an attorney. The lawyers at the Heyman Law Firm are dedicated to helping businesses owners. Our lawyers have extensive experience in working with clients in Baltimore and across Maryland and would be proud to work with you. To schedule a confidential consultation with one of our attorneys, contact us at (410) 305-9287 today.
Types of Business Partnerships in Maryland
If you are a partner in a business in Maryland it is important to know what kind of legal liability you are vulnerable to, especially if a partnership dispute is significantly affecting the business. Generally, there are three types of partnerships that can be registered in Maryland, a general partnership, a limited partnership, and a limited liability partnership.
A general partnership is established when two or more people agree to enter into business together. A general partnership can be created without a written contract or a filing with the State of Maryland. However, it is wise to formalize an agreement that specifies each partner’s rights, responsibilities, and share of the profits.
A general partnership is a wholly pass-through entity, meaning the money earned by the business passes to the owners’ personal income and is taxed accordingly. Each partner must pay their share of the partnership revenue taxes on their personal income tax returns.
A limited partnership is a business partnership that allows each partner to attain legal protection from individual liability for any debts, losses, or violations to the limited partnership. The limited liability granted by this form of partnership depends upon the individual partner’s investment contribution to the business. While a written agreement is not required to form a limited partnership, creating one without a written agreement would not be prudent. Regardless of whether the limited partnership has a written agreement, it must file a “Certificate of Limited Partnership” with the Maryland Department of Assessments and Taxation and they must pay a filing fee. A limited partnership is subject to the same tax liabilities as a general partnership.
A limited liability partnership offers liability protection to individual partners that generally shields them from malpractice claims or tort lawsuits that arise from the activities of other partners, employees, or agents of the business partnership. This protection also extends to contractual claims.
Advantages of Having an Attorney if Disputes Arise
If you wish to maintain the partnership, an attorney can arrange a partnership agreement for business partners who cannot agree on certain management issues. While Maryland does not require the responsibilities in a partnership to be clearly defined or written, having partnership dispute attorney set boundaries between the partners can be vital to a business’ survival.
A written agreement can set out issues like:
- Distribution of profits;
- Liability to creditors;
- Tax responsibilities or;
- Terms of dissolution.
By having these terms set out in writing, business partners can refer to the written agreement when a serious issue arises and determine how best to resolve the problem. Without a written agreement, partners may blame each other for responsibilities they believe the other partner agreed to handle but failed to do so.
Business Partnership Dissolutions in Maryland
The dissolution of a business partnership can occur for several reasons. For example, one business partner may want to retire, or a partner may feel that the other partners are not devoted to the success of the company. Despite the reason for the dissolution, the owners of a business partnership in Maryland must consider several factors before they can dissolve a business. One of the most important factors to consider is how the business partnership agreement addresses the dissolution of the company. Ordinarily, the business partnership agreement is drafted by the business partners when the business is established. The agreement should discuss the details of a dissolution from the distribution of assets to paying off creditors.
If the operating agreement is silent concerning how a business dissolution should be conducted, the issue may have to be resolved by a third party if the business partners cannot agree to mutual terms. For example, if business partners cannot agree on the true value of the company, it may be necessary to hire an appraiser to make a determination regarding the issue. Other factors that should be discussed include:
- Whether personal property used for the benefit of the business will be returned
- The amount of profits and debts apportioned to each business partner
- Where property from the company will be stored if necessary
It is important to note that articles of dissolution should also be filed with the State of Maryland if your business partnership is coming to an end. In addition to providing information about the dissolution of the company, this document should be signed by each partner of the business.
Engaging in alternatives like mediation may keep a partnership alive when disputes become difficult to resolve between partners. Business litigation is expensive and entertaining an alternative dispute resolution may be able to address each partner’s concerns with the partnership.
Our Baltimore Business Partnership Dispute Attorneys Can Help
If you are having a serious partnership dispute in your business, you should contact one of our attorneys. The attorneys at the Heyman Law Firm can help your business resolve partnership disputes that may be negatively impacting your business. To schedule a confidential consultation, call us at (410) 305-9287.