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5 options for dealing with a breach of partnership agreement

When you started your California business, you may have labored over whom to bring on as partners. Partnerships may have provided capital you did not have, connections to others in your industry, know-how and experience, and additional help with the nuts and bolts of running the company. Whether you are working with a single partner or several, you probably found out quickly that it is not always easy.

If you are now dealing with a partner who is violating the agreement you made in the beginning of the business relationship, you may be facing some difficult decisions. Now, it may be easier to see the wisdom in creating a partnership contract. If your contract is solidly drafted, it may provide options for resolving the dispute with your partner.

Resolving the matter

The last thing you want to do is to end the partnership hastily and then have to deal with a lawsuit if your partner claims damages from the expulsion. In fact, if the partnership consists of you and one other person, you may not have the authority to expel your partner. To protect yourself, you would be wise to carefully review your partnership agreement and seek legal counsel about your options, which may include any of the following or others:

  • File a lawsuit against your partner, especially if his or her actions resulted in financial damages to your business.
  • If the partner broke the contract through some act of fraud or misappropriation, seek compensatory damages in the amount of the partner's stake in the business.
  • Pursue any liquidated damages spelled out in your partnership contract.
  • Dissolve the partnership and form a new one without the former partner.
  • Attempt to reach a settlement with your partner.

Depending on the circumstances, you and your partner may be able to resolve your conflict through mediation or other forms of dispute resolution. This may even preserve the partnership and allow you to continue with business. However, if the breach of your agreement involves wrongdoing, you will likely want to terminate your relationship with that partner.

The longer a dispute goes on between you and your partner, the more your business may suffer. While you may not want to take your partner to court, it may be the most effective and complete way to deal with the matter. Enlisting the services of an experienced attorney can allow you to keep your focus on your business while your lawyer deals with the complex issues of business law.

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