Commons reasons for suing a business partner.

The most common grounds for suing a business partner include breach of the partnership contract, abandoning obligation, breach of fiduciary duty, or stealing money.

Author: Brad Nakase, Attorney

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The common reasons for suing a business partner include:

Abandoning promises and obligations.
Negligently handling business resources.
Business partner engaged in fraud.
Business partner stole property from the company.
Business partner stole money from the company.
Breaching a fiduciary duty owed to the partners or the business.
Asking for a court to perform an accounting.
Asking the court to declare who owns what percentage of the company.
Breaching a provision of a contractual agreement.

In this article, our Los Angeles business attorney will discuss grounds for suing a business partner as follows:

1. Can I sue my business partner?

2. When to sue a business partner?

3. What Are Alternative Options for Suing a Business Partner?

4. How Can a California Business Litigation Attorney Help You?

how to settle business partnership dispute

Can I sue my business partner?

Yes, you may sue your business partner for failing to meet their obligations or duties related to the business. The grounds for suing a business partner may include stealing, misappropriation, embezzlement, refusing to work, or breach of contract.

Business partners work closely together, and sometimes disputes arise that neither partner can remedy. Suing one’s business partner can be costly and time-consuming, but sometimes it is an individual’s only option.

For example, if one business partner purposefully harms the company the partners share, legal recourse may be the only option. If one partner steals from the other or the business, the other partner may have no choice but to sue to save their finances and the company’s money.

When a business partner decides to take legal action against their partner, they should contact an experienced attorney for counsel. A professional lawyer will help the victim strengthen their case, placing them in the best position to win.

When to sue a business partner?

When you have grounds to sue a business partner, don’t wait to contact a partnership dispute lawyer. Business partners form companies with great intentions, but sometimes their partnerships are dysfunctional. Not all damaged partnerships end in lawsuits, however, and specific circumstances must be in place to create grounds for a lawsuit.

Some situations that warrant legal action among business partners are:

The business partner stole from the company or committed fraud. For example, when one partner steals money or company property, the victim can file a claim to recover damages. Theft and embezzlement are also criminal acts, and the court may treat them as such.

One partner violated their fiduciary duty. When one partner breaches their duties to the company and their partner, the other partner can sue them for breach of fiduciary duty. For example, if one partner values their interests above those of the company and acts for themselves instead of for the company’s good, a lawsuit may result.
One partner breaches a contractual agreement, such as a partnership agreement or an employment contract. A breach of a contract can warrant a lawsuit since the victim can sue for damages.

A business partner breaches intellectual property rights. For example, if the company owns a patent, the partner cannot use the patent personally without company permission. They also cannot use a copyright or trademark without the permission of the business.

There are other situations that may warrant one business partner suing another.

What Are Alternative Options for Suing a Business Partner?

Although you may have grounds for suing your business partner, it may not be a good option. In some situations, suing one’s business partner may be the correct action. For example, if one partner commits fraud against another, filing a lawsuit may cause the partner to stop behaving deceitfully.

However, some disputes among business partners can be settled in alternative ways. Suing a business partner is a combative action that most businesses, and relationships, can not return from. Using a partner makes working together in the future impossible, and the lawsuit could negatively impact the company’s status and brand. Disputes that include lawsuits also can become costly very quickly, and even if one partner wins their lawsuit, they may do so at a financial cost.

When a business partner seeks an attorney, the attorney may help the victim explore other options. These options may include the following:

Mediation: Private dispute resolution that is non-binding but encourages discussion and resolution, with one person acting as the mediator and helping to sort through the details and reach a verdict.

Arbitration: Private dispute resolution resulting in a binding decision that keeps the affair out of the courtroom. Arbitration is more formal than mediation and includes multiple arbitrators to help “judge” the case and reach a binding decision.

Both arbitration and mediation are often less expensive and more private solutions to common disputes among business partners. Plus, arbitration and mediation sometimes result in more effective outcomes for everyone involved.

How Can a California Business Litigation Attorney Help You?

At Nakase Wade, we help individuals deal rationally with their business disputes. To determine if you have grounds to sue your business, please contact experienced our business dispute attorney for a free consultation.

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