A partnership exists when two or more people co-own a business. It is a voluntary agreement to work together to operate a company for a profit. Florida partnership laws recognize two partnership types – Limited Partnerships and General Partnerships.
What happens when disputes arise between partners with a 50/50 ownership in the company? They each own one-half of the company, so how do they resolve the dispute? Our Florida business law attorney discusses ways partners can resolve disputes without trying to force one of the partners out of the company.
Refer to the Partnership Agreement
The partnership agreement can resolve many partnership disputes, provided it was negotiated and drafted with the help of a Florida business law attorney. The partnership agreement should contain specific clauses that determine how disputes between the partners are resolved, including the rights of a partner to force the other partner out of the company.
Therefore, your first step in resolving a 50/50 partnership dispute is to review our partnership agreement for provisions such as:
- The legal responsibilities of each business partner
- The legal powers a partner holds
- The process for handling disputes, including mandatory mediation and arbitration
- The protocol for transferring ownership if the partners cannot resolve a dispute
In most cases, a partner does not have the legal authority to force the other partner out of the business unless the partnership agreement includes terms for mandatory transfer of the partner’s interest for specific acts or situations.
Instead, the partners in a 50/50 partnership must find a way to resolve their disputes. Generally, the steps in resolving 50/50 business partnership disputes include mediation, arbitration, and litigation.
The Collaborative Approach Can Produce the Best Result in a 50/50 Partnership Dispute
Protecting the business is the underlying concern for business partners. Therefore, business dissolution is usually the final option for resolving disputes in a 50/50 business partnership. Instead, early intervention to resolve the dispute is best. The longer the dispute continues, the more difficult it can be to work out an agreeable compromise to settle the dispute.
Therefore, it can help to hire a Florida business law attorney for a collaborative approach to partnership disputes. Instead of jumping into litigation, work to identify the root cause of the 50/50 partnership dispute. Identifying the reason for the dispute allows partners to understand each other’s position, which is an essential starting point for finding a resolution. A business law attorney helps facilitate open and honest communication between partners to allow understanding and constructive feedback.
When mediation fails, the partners may choose arbitration. A neutral third party listens to each partner and makes a decision. Potential resolutions could be a shift in partnership roles and responsibilities. The partners may discuss a partner buying out the other partner to end the partnership. Collaborative measures offer the partners the flexibility of resolving a dispute in a manner that benefits all parties.
If mediation and arbitration fail, litigation may be necessary. However, litigation is costly, and neither partner may like the judge’s decision.
Learn More About Business Partnership Disputes From a Florida Business Law Attorney
Partnership disputes can be costly for a business. Contact our Florida business law attorneys at Law Offices Of Jeffrey A. Herzog, P.A. to discuss alternative dispute resolution for disputes between business partners. If mediation does not work, our seasoned trial lawyers can discuss moving forward with arbitration or litigation to resolve the partnership dispute.