Can My Business Partner Sue Me?

When multiple individuals begin conducting business together, they may have effectively created a partnership, even if they didn’t intend to do so.  Thus, even though partnerships can be formed without the partners actually signing a partnership agreement, the partnership and its partners become subject to state laws governing partnerships.  The California business attorneys at Structure Law Group, LLP understand the laws and mechanics required to build a strong foundation for a partnership.  Being careful and meticulous about the partnership formation process can also help to prevent litigation if and when a dispute arises between and among business partners.

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Partnership Agreements

 Although not required under California law, as discussed above, entering into a partnership agreement when forming a partnership is highly recommended.  A partnership agreement is a legally binding contract that, among other things, dictates the roles of the partners and establishes guidelines for management of the partnership.  In addition, partnership agreements set out how potential legal disputes will be resolved.

For instance, many partnership agreements mandate that partners engage in alternative dispute resolution – most often arbitration and sometimes mediation – as a means of resolving a legal dispute.  Thus, if for example your partnership agreement contains an arbitration clause, you and any partner must resolve your legal disputes through an arbitration process separate from and outside of the traditional court process.

Whether you need an experienced business attorney to review and revise a partnership agreement already in place, or need assistance in drafting a partnership agreement from scratch, the California business attorneys at Structure Law Group, LLP can help.

Revised Uniform Partnership Act (RUPA)

 If you do not have a partnership agreement in place, the Revised Uniform Partnership Act (RUPA) will not only determine how you and your partner shall conduct business and how profits will be shared, but will also dictate how to proceed in the event of a legal dispute (RUPA operates as a kind of one-size-fits-all blueprint that may not be ideal for you and your partnership).  To this end, RUPA allows partners to take legal action against other partners and/or the partnership to enforce the partner’s rights under the partnership agreement, such as rights to profits or the right to dissociate from the partnership.  Furthermore, a partner can also maintain an action on behalf of the partnership for a breach of the partnership agreement or a violation of a duty to the partnership that caused harm to the partnership.

Lastly, it is important to keep in mind that, like any type of legal action, your partner will have a limited amount of time in which to file a lawsuit against you.  For example, if your partner plans to sue you for breach of the written partnership agreement, they will have four years from the alleged breach to do so.

Defending against Partner Lawsuits

 Lawsuits filed by your business partner can be a major source of stress and can potentially result in significant liability to you.  It is thus critical to have an experienced litigation law firm by your side to represent you and defend against such claims.  Also, because litigation can be expensive, an experienced litigation attorney will use their best efforts to resolve legal disputes sooner rather than later.

One of the best ways to avoid a partner lawsuit is to carefully negotiate and draft the partnership agreement with clearly defined rules for the management of the partnership, as well as duties and responsibilities of the partners.  With the help of an experienced business attorney, you can have a partnership agreement in place that can strategically avoid potential lawsuits.

Discuss Your Partnership Dispute with a California Business Attorney

 Structure Law Group, LLP can help you to draft a partnership agreement or review and revise a partnership agreement already in place.  In addition, should a legal dispute arise, its California litigation attorneys can help to resolve the situation in or out of court.  If you need any type of assistance with your partnership agreement or a partner dispute, please contact our California business litigation lawyers at 408-441-7500.

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