Starting a business with one or more business partners can be an exciting venture. When you begin, everything is new and exhilarating. And while you know that not everything will always go as planned, you at least know that you and your business partners have the same goals and objectives when it comes to the success of your business.
But what happens when that changes and your business relationships go sour?
When a business partner begins engaging in conduct that is harmful to your business in some manner, you might be wondering what you can do. Can LLC members sue each other? Can I sue my business partner for negligence? Can I sue my business partner for abandonment?
These are questions that many people have. Fortunately, The Curley Law Firm can help you answer these questions and more.
Firm founder and lead business law attorney Adam Curley has extensive experience handling business disputes of all types. Give The Curley Law Firm a call today to discuss your case and see what options you may have to sue your business partner.
Grounds for Suing a Business Partner
The most common type of partnership is a general partnership. A general partnership is formed when two parties agree to operate a for-profit business.
Typically, each partner will share equally in the profits and losses of the business. In general partnerships, each partner bears financial responsibility for the debts and liabilities of the entire partnership.
There may come a time when you might want to sue your business partner for their part of the liability. You and your partner may have the same goals for your business at its inception, but unfortunately, some business relationships inevitably go south.
Of course, some business partner disputes can be resolved without the need for further legal action. However, in some situations, the only option is pursuing litigation.
Below are some of the most common reasons for suing your business partner.
1. Breach of Partnership Agreement
Many partnerships will have a formal partnership agreement that describes the business duties and obligations of the partners in more detail.
If you have a valid and enforceable partnership agreement, you and your partner are subject to the terms laid out in the agreement. If your business partner breaches one or more terms of that agreement and you can show that you or the business suffered damages because of your partner’s breach, you will have a strong claim for breach of the partnership agreement.
2. Breach of Fiduciary Duty
Business partners owe each other a fiduciary duty to act in the best interest of the partnership, placing the partnership’s interest above their individual interests. A breach of fiduciary duty is commonly a violation of a partnership agreement. But even without a written agreement, you may be able to sue if your business partner has placed his or her own individual interests over the interests of the partnership.
A common question that many people have is, Can I sue my business partner for negligence? The short answer to this question is yes.
To have a valid negligence claim against your business partner, you must be able to show that:
- Your business partner did not act as a reasonable person would have under the same or similar circumstances; and
- Your business suffered harm as a result of your business partner’s actions.
If you can prove this, you may have a negligence claim.
Your business partner owes a duty of care to you and to the partnership to make decisions in good faith. A failure to do so can support a negligence claim.
Another question many business partners have is, Can I sue my business partner for abandonment?
Abandonment occurs when one business partner leaves the partnership prior to the proper dissolution, or “winding up,” of the business. Depending on the terms of your partnership agreement, you may be able to take legal action against your business partner to enforce your rights. An experienced business dispute attorney can help you determine whether and how you can sue your business partner for abandonment.
Can LLC Members Sue Each Other?
LLCs are structured slightly differently than general partnerships. Whereas a general partnership is governed by a partnership agreement, an LLC is governed by the terms of what is called an operating agreement.
This operating agreement may set out precisely when and how a member of the LLC may sue another member. However, some operating agreements may state that members cannot bring a lawsuit against another member at all. For example, it may require the members to instead participate in arbitration to resolve disputes.
Contact a Business Law Attorney Today
Nobody goes into a business relationship expecting to sue their business partner in the future. But the fact of the matter is that problems do sometimes arise. It’s important that you know your options and potential recourse in the event a dispute ever does come up.
Business dispute attorney Adam Curley has represented many individuals and business entities in a wide variety of business-related legal disputes. For questions about grounds for suing a business partner any other disputes that may arise, contact The Curley Law Firm today.