Partnership Disputes

Partnership Dispute Lawyers Assisting Businesses in Chicago

Partnerships are one of the oldest forms of business and have certain advantages. However, when partnership disputes arise, talent may be diverted towards resolving the dispute, rather than running the business. Conflicts over misappropriation of business opportunities, embezzlement, fraud, or omissions in the partnership agreement can jeopardize an entity. Any dispute, whether between just two partners or all the partners in a large business, should be handled efficiently.

Seeking to Resolve a Conflict between Partners

In Illinois, the Uniform Partnership Act governs partnerships. General partnerships are created whenever two or more people agree to do business together for profit. The partnership is a separate entity from the partners.

Lack of Solid Partnership Agreements Causes Disputes

There need not be a written agreement to form the partnership, although the lack of a well-drafted agreement causes many disputes between partners. There are no formal requirements to create a partnership, although it must comply with various business laws. The partners typically share in the profits as well as the risks of liability and loss. However, the partnership can be limited such that a partner is not personally liable for business losses.

The partnership agreement can detail goals and procedures, occasionally even superseding statutory requirements about partnership functions, but it cannot abrogate a partner’s legal duties of good faith and loyalty.

Partners Owe Fiduciary Duties

Each partner owes the other partners fiduciary duties of loyalty and care, and good faith and fair dealing. A partner must work in the interests of the partnership rather than his or her personal interests. Once a partnership is in the process of ending, however, the partner’s duty of care is limited to refraining from grossly negligent or reckless or intentional misconduct, or knowingly breaking the law.

Many partnership disputes arise because one partner violates his or her duties to the partnership or the business. A partnership agreement can specify specific types of acts that do not violate these duties, as long as they are not “manifestly unreasonable.” What is unreasonable, however, may hinge on a court’s interpretation.

A Partner Can Sue to Enforce Rights and Protect Interests

Under Sec. 1001, a partner can directly sue another partner or the partnership for legal or equitable relief to enforce his or her rights and to protect his or her interests. This includes rights based on a partnership agreement, based on the law, or independent of the partnership relationship. The partner who is suing must plead and prove an actual or threatened harm that is not solely the result of an injury suffered by the separate entity of the limited partnership.

Dissociation of a Partner

Many partnership disputes may be resolved without dissolving the partnership. However, in some cases, the dissociation of a partner may be necessary. Under the Uniform Partnership Act, a partner can only dissociate before the termination of the limited partnership under certain specified circumstances. These circumstances include:

  • Giving notice of an express will to withdraw;
  • Expulsion pursuant to the partnership agreement or unanimous consent of other partners because it is unlawful to continue with the withdrawing limited partner; and
  • a variety of other situations.

Seek legal guidance from experienced Chicago partnership dispute lawyers.

Because of the distraction from business operations involved in a partnership dispute, it is often better for a business to avoid prolonged litigation. At the Voelker Litigation Group, our experienced partnership dispute lawyers can help clients in Chicago and other Illinois cities try to resolve their differences through informal methods of alternative dispute resolution.

However, there are cases in which alternative dispute resolution is not successful, and where it may be necessary to go to trial. At the Voelker Litigation Group, our Chicago attorneys are experienced negotiators, but we can take a business dispute to trial when necessary.

Voelker Litigation Group: Losing is Not an Option.