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Home > Blog > Business Law > The Importance of an Attorney in Business Partner Disputes

The Importance of an Attorney in Business Partner Disputes

If you start a business with another person, you depend on that person to contribute to the business and to work toward goals, helping the business to grow and to thrive. If business partners, co-shareholders and co-members (all hereinafter referred to as “Partners”) are not in agreement regarding how to run the business, it can cause serious harm. Unfortunately, some disputes inevitably arise, often serious ones, and they can threaten the well-being of your business. An attorney can both help business Partners prevent disputes and help to work out a solution when disagreements do happen.

At Formation

Businesses are more likely to succeed when they have legal assistance at the time of formation. This is because an attorney can help the partners figure out and formalize their roles in the business.

It is very important to put things in writing at the start of a business. Sometimes, partners have a rosy view of the future and believe that everything will run smoothly, and so do not want to bother with composing a written partnership, shareholder or operating agreement. Florida statutes provide some guidance for a Partner’s rights and responsibilities. But the statutory guidelines are just an outline, and are not adapted to any specific business’s needs.

Written partnership agreements are key to the success of a business. Or, upon choosing to form a corporation or a limited liability company (LLC), instead, the owners will need to craft a shareholders agreement or operating agreement, respectively. Outlining the Partners’ roles and duties, along with other issues specific to the business, can prevent future problems and disputes. Ambiguity leads to conflict, so it is important to write things down as quickly and clearly as possible. It is also important to include clauses outlining what happens if the business shuts down or if one Partner wants to leave. Partners should always have a written buyout clause, as well as a clause directing how to distribute a business’s assets among the Partners if the business fails.

An attorney can help business Partners understand what they are signing. The attorney can explain the terms of the agreement and tailor them to the business’s specific needs. Instead of using a generic agreement, such as those found on the internet, a lawyer can draft something that addresses the important questions at issue in your specific business.

Partnership agreements, shareholder agreements and operating agreements are essential to obtaining financing. Any possible investors will want to see a business entity’s organizational agreement so that they have an understanding of how the business is run. If a company obtains outside financing, the Partners will want to avoid losing control of their company to the investors. A lawyer can help the Partners ensure that any documents they sign will be favorable. Further, it is especially important for an attorney to review documents if one partner is contributing more capital than the others.

In Disputes

It is best to prevent as many disputes as possible by drafting clear and specific organizational agreements at the start. But inevitably, disputes will arise between Partners. Often, disagreements deal with who has the authority to make certain decisions. Especially for serious disputes, it is helpful to work with a lawyer to help resolve the Partners’ differences. An attorney can help in the mediation or arbitration process by acting as a neutral third party. The attorney can mediate between the parties and facilitate communication, so that they can reach an agreement that is acceptable to all the partners.

Having an attorney review documents and help with negotiations saves money in the long run. Though there is an initial expense, a clear and detailed partnership, shareholder or operating agreement, reviewed by an experienced business law attorney, can prevent future legal disputes and save future costs. Please contact the Law Offices of Larry E. Bray in West Palm Beach and Boca Raton for an initial consultation and to discuss any legal concerns you may have.

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