Can I Sue My Business Partner?
Starting a business with a business partner can be an exciting and rewarding experience. What could possibly go wrong, right? However, as time goes by, problems and disagreements may arise. When this happens, you need to understand your options and potential outcomes when you have disputes with your business partner.
A common question William B. Hanley, Attorney at Law, receives from potential clients is, “Can I sue my business partner?” While the short answer is “yes,” there are many things to consider before filing a lawsuit against your business partner. If you are considering suing your business partner, consult with an attorney first.
William B. Hanley, Attorney at Law, is here to listen to your situation and help you resolve your dispute while protecting your best interests. With an office in Newport Beach, California, the law firm also serves Irvine, Los Angeles, San Diego, Orange County, Los Angeles County, and San Diego County.
Suing Your Business Partner
Generally, business partners can sue each other when they have grounds to file a lawsuit. However, just because you can sue your business partner does not necessarily mean it is your best resource. There are many alternatives available to resolve a dispute between business partners. After all, litigation is adversarial and can cause irreparable harm to your business, not to mention that a lawsuit could negatively affect your company’s reputation and brand.
William B. Hanley, Attorney at Law, can help you explore the alternatives to suing your business partner, such as arbitration and mediation. These alternative dispute resolution methods tend to be less costly, more private, and less adversarial compared to litigation.
When Suing Your Business Partner Is Warranted
In order to sue your business partner, you need to establish that a lawsuit against the partner is warranted. Some of the grounds to sue your business partner include:
Breach of fiduciary duty. When a business partnership is formed, each partner assumes the responsibility to act in the best interests of the company. This is known as the fiduciary duty, which is an umbrella term that covers a duty of honesty, a duty of loyalty, a duty of fairness, and other duties. When a fiduciary duty is breached by the business partner, you can sue them. Remedies for breach of fiduciary duty claims include lost profits, exemplary damages, out-of-pocket expenses, and mental anguish damages, according to the American Bar Association.
Violation of contractual agreements. Business partners may sign many different agreements when starting and operating their business, including but not limited to a partnership agreement. When one business partner fails to fulfill their contractual obligations (partially or fully), the other partner(s) can file a lawsuit.
Violation of intellectual property rights. Disagreements between business partners may arise when one of the partners begins to personally use the intellectual property of the business without permission from the other partners.
Abandonment. When a business partner walks away from the partnership without following the proper procedures for the dissolution of the partnership agreement, it can be grounds for a lawsuit based on the ground of “abandonment.” Much like in a marriage, walking away from a business partnership requires paperwork.
Fraud or theft. If a business partner engages in fraud or theft, it can be grounds for a lawsuit. Stealing money from a partnership or otherwise committing fraud may also become a criminal matter.
There may also be other grounds for a lawsuit against your business partner. Discuss your unique situation with an attorney to find your best course of action.
What if Your Business Partner Is Suing You?
If you are being sued by your business partner, you need to take the situation very seriously. After all, a lawsuit can have a number of implications. If you lose, you can be held liable for restitution of anything obtained illegally as a result of your conduct and also be ordered to pay damages for any harm or financial loss the partnership has suffered.
Other consequences include being forced out or expelled from the business partnership. Fortunately, these outcomes can be avoided if you can negotiate a favorable settlement. A skilled attorney can negotiate on your behalf to reach a mutually-beneficial, out-of-court agreement with your business partner.
Seek Trusted Legal Guidance
Get legal counsel if you are considering filing a lawsuit against your business partner or if your partner is suing you. William B. Hanley, Attorney at Law, can evaluate your options and litigation strategies to protect your best interests and strengthen your case. Reach out today to schedule a case evaluation.