Arthur R. Lehman, L.L.C.

What are my options in a partnership dispute?

Though it is always in everyone's best interests to avoid a business dispute and last week's post focused on how New York residents could go about avoiding partnership disputes, the truth of the matter is that business issues cause disputes across the city on a daily basis. What should one do when his or her business partnership sours?

As mentioned in last week's post, the first step business partners should take is to try and resolve their differences with one another. A good partnership agreement plans for eventualities such as this, but it is possible that New York partners either did not draft an agreement, or failed to create a provision for whatever the particular dispute is. Even though it is easy to advocate for communication in these matters, sometimes the situation is such that partners are not willing to compromise on a certain matter with one another. In that event, the next step is to decide what each partner wants.

Partners can either decide to sell the business to a third party or one partner could buy out the other one. In order to agree on who will buy out the business, perhaps the factors to consider are who has more passion for the business and who has the cash to buy it out immediately. It is essential that both partners need to decide mutually on the course of action that needs to be taken, but as can be imagined, each partner may think him or herself the right person for the job.

It may be beneficial to invite a third party, possibly an attorney, to act as a corporate therapist in this case and ensure the partnership dissolution is done accurately. It might also be better for each partner to have the business evaluated independently to ensure they are getting the fair market value. Consulting an experienced attorney may be a good idea, at there is too much at stake in these situations to leave the matter to someone inexperienced.

Source: Entreprenuer.com, "What to do when your partnership sours," Toddi Gunter, March 11, 2010

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