When a business relationship becomes strained, it can be difficult to know what options there are.
If that’s the case, you may have asked yourself “Can I sue my business partner?”
While it’s never the ideal solution, the answer is yes. Sometimes the only way to resolve an issue with a business partner is through a lawsuit.
If your business partner is engaging in conduct that is harmful to the company, or that violates their obligation to the company, a lawsuit may be the only option.
Are you dealing dispute with you business partner?
Schedule a consultation with Wood Edwards LLP today to discuss your options.
What Can I Get From Suing My Business Partner?
Because filing a lawsuit will only make a tense situation with your business partner worse, it’s important to consider what the possible outcomes are. When you sue your business partner, your goal might be one of several things.
It could be enforcing your rights under the partnership agreement, enforcing your rights under state law, or protecting your own interests.
There are many things a business partner can do that would be cause for a lawsuit. Generally, however, it comes down to whether or not your business partner violated one of the duties he or she owes to both you and the company.
Business partners have what is called a fiduciary duty to the company. In general, this means they must act with the best interests of the company in mind, above and beyond their own self-interest. If your business partner breaches their fiduciary duty to either you or the company, it may be necessary to sue. Especially if the conduct is ongoing or severely harmful to the business.
Of course, that’s not the only reason why you may need to sue your business partner. Fraud, theft, and breach of contract are all reasons why you may need to sue your business partner.
Can I Sue My Business Partner for Abandonment?
Just as there are proper procedures to follow during the formation of a business or partnership, there are also procedures for the proper dissolution of the company (called “winding up”). If a partner abandons the partnership improperly, there are specific legal consequences.
Depending on how the business was set up, this can be a big problem for any remaining partner or partners. Fortunately, if you and your business partner entered into a Partnership Agreement or other agreement when forming the business, you may have the option to take legal action to enforce your rights under the agreement.
Even without an agreement, state laws may also allow legal action to be taken. Because it varies based on the kind of business, the nature of the agreement involved, and state laws, it’s important to hire an experienced business attorney to help litigate your dispute.
Can I Sue My Business Partner for Negligence?
Similar to abandonment, acting negligently is probably a violation of a partnership agreement or operating agreement (if the business is an LLC). In general, a breach of these agreements takes the form of any action or, in some cases, inaction.
If that’s the case, the partner may be violating one or more agreements entered into when the business was formed. If your business partner engages in negligent conduct, you may be able to sue them.
Can LLC Members Sue Each Other?
Under the law, a limited liability company or LLC is has a different structure than a partnership. As such, there are slightly different requirements for when a member of an LLC can sue another member.
Similar to the Partnership Agreement drafted before forming a partnership, LLCs have an Operating Agreement. This sets out exactly how the LLC’s members can take legal action against one another.
On the other hand, some Operating Agreements may alternatively state that members are not liable to each other, in which case no legal can be taken. In these cases, some states have laws that provide remedies that preempt the operating agreement under certain circumstances.
Not all LLCs have an operating agreement. Unfortunately, many LLCs form without drafting any sort of contracts about the rights and duties of the parties. In those cases, members in an LLC can only sue one another if they can prove that they have been personally harmed apart from the other members or the business.
Hire A Business Law Attorney
No matter what the situation is, determining what options are available to you when your business partner has abandoned the business, acted negligently, or other violated their duties, it’s important to hire an attorney who can help you analyze the situation.
Whether you can sue your business partner ultimately depends on what state you’re in. Also, what kind of business you are a part of, and what your business partner has done. Contact the Texas business law attorneys at Wood Edwards LLP to get help now.