Deciding to sue someone can be difficult, especially if the other person is your business partner. However, sometimes business lawsuits are necessary. Let’s look at seven reasons you might feel forced to sue a business partner.
#1. Abandonment.
The need to sue a business partner could arise gradually. You might suddenly realize that your partner has been absent more often than usual. Business operations might have occupied your attention so much that it takes time before you realize your co-owner no longer bothers to contribute to the business. If there’s no explanation other than abandonment, you might need to call your business lawyer to discuss your options.
#2. Theft – a strong reason to sue a business partner.
This reason can take many forms. You could experience petty cash accounts or notice equipment and supplies are disappearing. Theft is a strong accusation to make. But if your co-owner is stealing from the business you both worked so hard to build, it makes sense to consider taking action. You could be protecting yourself and your business.
#3. Breach of fiduciary duty.
Business owners are fiduciaries and are expected to act in a certain way toward the business. Fiduciary duty can be described as a situation “… when a person or entity places trust, confidence, and reliance on another to exercise discretion or expertise…”
Partners might breach their fiduciary duty by putting their own interests ahead of the business. Doing so could harm the company’s continued operations and future success. You might find it necessary to sue a business partner whose actions are hurting the business.
#4. The partnership becomes unworkable.
Most business partnerships start out with everyone on the same page, at least on most things. At some point, though, you may find that your relationship no longer works. It could be that you disagree on basic day-to-day operations or, even more serious, about the company’s mission or business model. If you and your co-owner cannot agree on how to proceed, you might need to sue to get satisfaction.
#5. Conduct that negatively impacts the business.
This reason to sue a business partner applies to both business and personal conduct. Your partner could engage in unethical, illegal, or even immoral behavior that tarnishes the business’s image. Some actions could even leave the business vulnerable to liability issues.
If your co-owner refuses to stop the improper or illegal acts, you might need to sue. Again, this could protect both you and your business interests.
#6. Breach of the partnership agreement.
Partnerships should always start with a strong partnership agreement. Typically, these contracts lay out how the business will be operated, who is involved, and each person’s responsibilities. Breaching a partnership agreement could take the form of one business partner failing to make necessary contributions or doing things that deliberately violate the terms of the agreement.
#7. Misuse of the company’s intellectual property.
Most businesses have some form of intellectual property (IP) assets, such as copyrights, trademarks, company secrets, or patents. IP infringement is a serious problem, but that usually happens from an external source. Your business partner, however, could leak or sell trade secrets. It’s also possible that your co-owner could use IP property for a separate business or for personal gain. Either way, you could have to sue a business partner to stop the misuse and recoup the company’s losses.
It’s not an easy thing, but sometimes you do have to sue a business partner.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.