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Avoiding Partnership Litigation

by | Sep 1, 2015 | Business Law


When you have a business that is founded on a partnership; your first order of business is to preserve the partnership. If the partnership cannot be preserved, you should make every attempt to avoid partnership litigation. This means that you are not participating in fraud, breaching of any contract or being an obvious “opportunist” in the business partnership. Avoiding these activities/situations is the first step in preserving your partnership and avoiding or minimizing the risks of partnership litigation.

Your First Line of Defense: Avoid Partnership Litigation

If disputes arise regarding money, quickly take the issue to accounting to be addressed. If you’d like to shorten the process, you can conduct your own accounting and outline the details supporting your case while your partner simultaneously does the same thing. Utilizing this simple method to attempt to reach an agreement early on can help partners avoid costly legal battles in some cases.

Mediation can be a particularly useful tool in the early stages of a partnership dispute that can successfully keep the argument out of litigation. Through mediation, many “impossible” partnerships can reach resolution. Sometimes they discover a quick resolution through one partner buying out the other. If this is the case, a business appraisal is utilized to generate and concur upon a buyout figure. This resolution is best when two partners are incapable of continuing their agreement as originally planned. If a partnership dispute has passed the point of no return, it’s best to attempt to come to a resolution prior to the start of litigation. Mediation is the best way to do so. It’s a fantastic lawsuit avoidance maneuver.

Another method of avoiding the break up litigation is to sell the business outright. This method requires that the business be doing well and that a willing buyer can be found. If either of these vital elements is missing, selling the business in not a viable option for avoiding partnership litigation. Once the sale price is determined and set, the business is sold. All of the business’s debts are paid off and each of the partners is left with their own share of what’s remaining.

The escalation of partnership disputes to partnership litigation can be a wrecking ball. It’s unnecessary to make the situation worse. At the end of the day, you are better off spending your time and energy on efforts to grow your business, generating new projects, and being available to your friends and loved ones. Having a bitter war with an old business partner is simply not useful.

For additional information about ending partnership disputes before they escalate to partnership litigation, contact the experienced southern California business attorneys at The Law Office of the Law Office of Ernesto Aldover.