When you go into business with one or more people, there is always a risk that the relationship will end badly. Whether you simply want to enforce your rights in the business or end the business altogether, it is important to understand how the law affects your rights. It is especially critical to know how the form of your business may impact your ability to sue your business partners or enforce your rights if the need arises.
A business can take many forms. Statutes provide for the formation of limited liability companies, corporations, or partnerships. Regardless of the business form, hopefully there is written documentation governing how the relationship between the respective owners and between the owners and the business will work, for example:
- A partnership is governed by a partnership agreement;
- A limited liability company, whose owners are called members, is governed by an operating agreement;
- A corporation, whose owners are called shareholders, are governed by bylaws or a shareholder or stockholder agreement; and
- There are also statutory default provisions that will apply in the case that the business does not have documentation outlining the business relationship.
If there is no such documentation, the parties default to the statutory structure governing the particular type of business entity.
Business lawsuits evolve for many different reasons and under many different circumstances, but often occur when one owner feels there has been a violation of the governing agreement or they have been wronged in some way. An owner may also sue if he or she has reason to believe there has been a breach of fiduciary duty by the other owners, including the duty of loyalty, the duty of honesty, or the duty not to use business assets for personal use. Other causes for business disputes between owners deal with the misappropriation of business funds, or the usurpation by one of the owners of an opportunity belonging to the business, or the request for a buy-out of the business. These disputes are often factually dependent upon the particular business and the business relationship.
In extreme cases, an owner may even sue to force a dissolution of the business. This typically happens when there is a deadlock under the applicable governing agreement and the owners cannot decide how (or whether) to end the business.
Because there may be procedural requirements which must be met in these business disputes before commencing litigation and because this area of law can be complex, it is prudent to contact an attorney experienced in handling business disputes. These business disputes can be resolved in several ways, including negotiation, mediation, or litigation if necessary. We have experience representing majority owners, minority owners, and businesses in these often complex disputes.