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What To Do When Your Business Partner Is Suing You

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Note: Check out this article to know why a business lawyer is important?

If you entered a new company with your best friend, you knew it would be an enormous success without fail. You both anticipated that your start-up would make a profit before your first full year in business. A strong probability, many at the time told you.

But you were correct; the start-up was the way you thought about it. There is even one interested buyer, or so you can learn from your partner. They want to sell the start-up, but you want to carry it on, perhaps you can blow it up and make it bigger. You and your best friend and your business partner, who can’t look at each other, can hardly stand in the same room. The animosity affects your work and staff. So one day it’s happening: you threaten to file a lawsuit with your business partner. What’s your reason for bringing you to Court? You hurt the firm, and they want you out. They want you out.

A partnership will be formed when two or more people come together to share profit and losses on common grounds. This type of corporate relationship may exist between individuals or businesses and persons. The agreement is compulsory under the Indian Partnership Act. It cannot be written, but it is more valuable in writing, as it is useful for legal proceedings if a contract is infringed. The registration of a company is also significant. It cannot sue its partners or other persons for the unregistered business. If a party breaking the agreement can take lawsuits against the other partners.

You will be paying legal fees and other extra court expenses without a professional liability insurance program. Small business insurance will cover financial risk when challenged. When a company partner threatens you with a lawsuit, it is like taking care of you.

A company can end from successful sales to failing bankruptcy in many ways. Sometimes even if a partner files a lawsuit with a different partner, a company can end. Although, depending on the nature of the proceedings and relationships, the best legal choice may lead to the breakup of the company, the holder of a partner’s liability for any infringement of the contract, or the removal of a partner from the company.

The First Three You Must Follow Are:

Contact The Business Attorney

Given the consequences of a lawsuit between business partners, it is advisable to talk to an informed local lawyer in the East Bay area. An Attorney will warn and prepare you for any potential consequences about the legal choices that might be available in your particular case. If the cases begin with the trial, an attorney will argue in the courts on your behalf.

Since a claim from partners can be so substantial, it is advised to talk to an experienced company lawyer in Chattanooga who is aware of the legal problems facing businesses in the Chattanooga region. With the help of a lawyer, you will consider the right legal choices to assist with the planning of any potential outcome of your specific case. For a fact, if the case continues, a lawyer is always aware of all the facts and will fight for you in the trial.

Look At The Partnership Contract

Many business operators decide when forming a partnership to enter into a “partnership agreement” that outlines their rights and responsibilities and the process and damages available to each partner in case of legal proceedings. Since all such clauses cannot be legal or enforceable, a review of the relationship agreement by an attorney is required to decide if the agreement is binding. More importantly, the attorney should explain the legal provisions of the relationship arrangement and make sure each partner understands thoroughly the terms of a contract and how those terms impact the rights and obligations of a partner.

Without a partnership agreement, no business partnership may function, defining each partner’s rights and responsibilities to manage and conduct the business. In case of a lawsuit, it outlines any party’s procedure and the possible damages. All these provisions may not be valid or enforceable, however, so it is essential that a lawyer checks your partnership agreement and determines whether it is legal. Moreover, the partnership agreement’s legal conditions agreement’s customary conditions will be clarified and ensure that every corporate partner fully understands the terms in a document and how they exercise their rights and responsibilities.

Bring Out All The Records

For any company litigation, business documents would be relevant. These include financial statements, regulatory submissions, and any record about the proceedings. A partner may often restrict access to these essential documents in the course of a dispute between business partners. Therefore, keeping a copy of your company documents is necessary where possible. To provide you with complete guidance about how best to proceed with a suit, your business lawyer also needs to provide the highest possible detail.

For any form of company argument, business records would certainly be necessary. They consist of financial statements, administrative reports, and any document relating to the proceedings. At times, one of them might be able to restrict access to these vital records during legal action between business partners. Therefore, a duplicate of your company records must be kept whenever possible.

A Calm Discussion With Your Business Partner

Please request a meeting with your business partner to discuss your desires and see if you can find a consensus. If you find it difficult to express your thoughts, ask a small business counselor for support. A small business consultant will help you express your ideas and remember how you co-founded the company.

Keep track of All Messages And Agreements In Front Of The Business Attorney

If you and your business partner have agreed in writing, it can be used in a court of law. If two years or more after your startup date, you or your business partner decided to sell the company and the dispute (as mentioned above) related to the sale of the company, it could do or break the legal proceeding. Ensure sure all communication letters and communications are available so that nothing is omitted from the background.

Read The Fine Print

What has been included in the partnership agreement which grants your partner the right to sue? The Small Business Chronicle says that your partner has no legal right to sue you unless you have expressly broken the partnership agreement. Your business partner will not expel you from the company unless the agreement addresses expulsion specifically.

Offer Your Business Attorney To Buy Them Out

If the money is in your business partner, offer to buy your half of the firm with interest. You will most likely reverse this option, especially if it would be more profitable for the company as a whole, but still worth trying.

 Collect Evidence

The dishonest partner cannot be removed immediately from the company, or the others cannot dissolve it. Simple suspicion could not suffice to sue him. First, the business partner must collect evidence for the cheating partner for his infringement of the agreement. All cash transactions with the partner will stop immediately after it has been verified.

Document All The Issues With Your Business Attorney

Following a review of the Partnership Agreement, list your partners’ issues. To determine whether any of these problems are a valid reason for dissolving the partnership, compare them with the partnership agreement.

Once your list is drawn up, you will be better able to create a plan to reactivate your business partners and to repair both business and personal relationships. But you may need to dissolve the partnership without trying to fix the problems when you suspect that your business partner is spending money or is engaged in other illegal activities.

You should speak with your partner about the problems and find a solution, thus maintaining the partnership and the business. Expect to meet in a location other than your place of business with your partner and your counsel. You may want to have an initial meeting with a business lawyer if you think your partner(s) might not be open to your suggestions. Use the meeting room for the lawyer or schedule a lunch at a casual restaurant if you feel like things would be more comfortable in an informal environment. Make sure you have a checklist to avoid missing anything.

File A Suit

When filing a lawsuit, the particular business partner must be proved untrustworthy and can harm the enterprise by its fraud. The documentation collected will demonstrate the accounting mistakes such as missing accounts, credit list mistakes, etc., along with a credit/debit card proof of withdrawal and cash registration entries. The findings must be found. Apart from money fraud, if a partner reveals the company’s details or secrets to another third party, he or she would have violated the trust and could sue the other for a breach of confidence.

In general, if the partner is cheating or deceptive behavior then, even under Sec 406 of IPC, a criminal complaint shall be filed following Sec 420 of IPC, and civil action for money recovery and arrears and penalties shall proceed following the relevant provision.

Seek For Compensatory Damages

If compensatory damages are included in the partnership agreement, then the partner who violated the partnership agreement must compensate for the money he agreed to. The Court shall determine the amount to be indemnified if the amount is not mentioned. If the Court considers the provision invalid, the Court will grant the firm damages.

Settlement Among The Partners

If the other partner finds the other trickery, he can settle the problems and negotiate and thus restore the business link. The settlement agreement should be drawn up, with the terms of the negotiations complete, and the partners should sign it duly. It could reduce the Court’s time and the legal cost as well.

Dissolution Of Partnership Firm

When the partner learns that the other partner cheats, he will dissolve the company. He should first send the notice of his willingness to suspend the company to the partner. Following Article44 of the Indian Partnership Act, the Court may order dissolution. If the corporation is dissolved, the partner is responsible for the acts taken by third parties.

Work Out Your Plan Of Action With Your Business Attorney

You will have to have an action plan if you want to rectify any issues with the relationship. It is essential to draw up and sign a document detailing the position of each partner. It must have a date of end. If things have never improved by the selected date or if your partner(s) are returned to old habits, the date will be when the company or the company will dissolve, or formal arbitration begins. When the arbitration is required, the Arbitrator (a neutral third party) acts in favor of a fair compromise between you and your partner(s) and then establishes a binding agreement, which you both will sign with your partner(s).

There should also be a second action plan for dissolving your partnership if there is no arbitration or if your partner(s) return to their poor business habits. The strategy would set out the periods for the company liquidation or legal action against your partner(s). It will also define ways to start a new business, register a new business as a sole proprietor, or run the current company without the troubled partner if the partnership arrangement allows it.

Starts are always risky, and its owners are the main contributors to the outcome – a successful trade agreement or failure to make bankruptcies happen. Business partners cannot, in some circumstances, find a compromise, and one can sue another for many reasons. The potential outcome of action against the partners may lead to a breakup of the company, keeping a partner personally liable for a breach of the contract, or even to a business owner excluded. In this situation, it depends on many factors to find the right legal remedy, from the form of legal action and relationship to the causes.


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