Businesses

Business Ownership/Shareholder Disputes

Disagreement or Breach of Agreement, Breach of Contract, Bad Faith, or Conflict of Interest between Business Owners, Co-Owners, Partners, Shareholders, or Members in an LLC

You would be surprised how many disputes between business partners are heard before a judge and jury.  No one goes into business thinking this can happen.  Let us give you a few examples. 

Example 1

Business Owners together for years, father and son, no longer get along.  The percentage ownership of the son has never been formalized, but he wants his share representing all the work he has put in over the years.  Father refuses, citing paperwork which does not show son's interest, despite verbal promises by father.

Example 2

Unrelated individuals form a business together to develop a product.  They are never granted a patent, despite the work and money they each put into the company.  Bad feelings ensue.  Name calling begins.  A lawsuit is filed to gain sole ownership of the product idea and prevent the other partner from interfering.

Example 3

A group of unrelated individuals form a business together to sell a specialty product.  One manages the company, one markets the product and the others all put in money.  They have additional employees.  The partner who markets the product finds some irregularities in the accounting.  The partner who is managing has paid for a deck on his house, a car for his son and other personal items with company money.  A large amount of debt has been incurred and the company goes to receivership.  The employees are out of work and two partners lose their homes, having signed personal guarantees on the debts.  All investing partners lose their stakes.  No one was watching the store.

These examples may seem far fetched, but unfortunately they happen everyday.  Each is taken for a real life case we have handled - Partnerships, Limited Liability Companies and Closely Held Companies (family owned business).  Although business entities are subject to audit by the Internal Revenue Service, it is up to each company to police itself on an ongoing basis and to document its business structure and decisions with the appropriate documents.  In each of the examples, the owners failed to properly document their agreements, expectations and the limits of authority granted to management.  The failure to document these matters meant that a judge had to decide what was reasonable under the circumstances.  In each example, protracted and expensive litigation could have been avoided had the parties chose to act proactively.  Instead resolution in each of these situations was long, expensive and painful.

The Law Offices of Joan M. Swartz can do two things for you.  First, we can examine your business structure and corporate records to make sure they are sufficient, if necessary, to prove good faith in transactions and decisions made on behalf of the company.  We can record and properly document ownership percentages, and write or modify agreements which are fair to all parties involved, but are most importantly clear to all parties involved.  This is preparation.

Secondly, if it is too late to prepare and you are already in a dispute with other owners, we can analyze business and personal records to make the best case possible for your ownership rights under the law.  If the records are clear enough, court costs may be avoided by alternative dispute resolution (ADR) which may include mediation or binding arbitration.  In the absence of clear records, litigation may be necessary.  We can represent your ownership interest in court.

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