Business disputes arise frequently, not only between the business and customers but among those who are partners or investors in the business.
In partnership disputes, two or more people who are in business together often disagree about the distribution of partnership profits or, in the event of the dissolution of the partnership, how the assets of the partnership are to be divided. In many cases, there are very few documents, if any, which define the agreement among the partners. Partnerships can arise out of a verbal understanding as long as it is clear that the partners agree to divide the profits and the obligations of the partnership. However, a verbal partnership is a very risky proposition that has led to frequent lawsuits.
Courtroom disputes commonly arise in limited liability companies (“LLC’s”) where one member of the LLC is alleged to have abused his/her obligations and either improperly handled company assets or abused his/her authority with regard to unauthorized financial dealings. In LLC’s and in corporations, there are often disputes where one member or minority shareholder is treated unfairly by the majority members/shareholders. A claim by the minority shareholder for “oppression” and unfair dealings arise frequently in the context of company assets and finances. In the corporate context, all directors of a company have a fiduciary obligation of loyalty and due care and fair dealing. In that context, a director cannot seek out or participate in a business opportunity that is not in the best interest of the corporation of which he is a board member or officer, as it may be disloyal to do so.
The best protection for anyone in a business endeavor such as a partnership or an LLC is to be sure that the documents forming the partnership or LLC are in good order and that they are clear and fair to all concerned. It is advisable that if a person goes into one of these business entities he or she should have legal advice to be sure their interests are protected at the outset. Any attempt to save a few dollars by drafting the forms on your own or by utilizing forms found online, is likely be result in much more expense later. If you are forming a business, or if you find yourself in a business dispute, contact your local, trusted business attorneys to provide guidance at every step.