Resolving Partnership Disputes Without Dissolving the Business
A partnership dispute can put the business you built at risk even when no one wants to shut it down. Disagreements over money, management, or major decisions can interfere with daily operations, but they do not always require dissolution. Depending on the partnership and the circumstances, you may be able to negotiate a resolution, address a partner's departure, arrange a buyout, or pursue another remedy while the business continues operating.
At Kopp Legal PA, we help business owners in Palm Beach Gardens, Florida, and the surrounding areas address partnership disputes to protect the business and the partners' interests. Our team can help you review the partnership agreement, assess available options, and determine an appropriate next step based on your circumstances. Contact us to schedule a consultation.
Can a Partnership Dispute Be Resolved Without Dissolving the Business?
Yes. Florida law allows some partnership disputes and partner departures to be addressed without dissolving and winding up the business. The result depends on factors such as the partnership agreement, the type of partnership, the reason for the dispute, and the circumstances of a partner's departure.
Potential approaches may include negotiating changes to management or decision-making procedures, using mediation or another negotiated process, arranging a partner buyout, addressing a breach of the partnership agreement, or pursuing a legal remedy when the partners can no longer reasonably operate together.
Reviewing the partnership agreement should generally come early in the process. It may establish procedures for resolving disputes, withdrawing from the partnership, transferring an interest, or handling other events that affect the business.
Through our Business Conflicts, Disputes, and Litigation Services, we can help you evaluate the dispute and the options that may allow the business to continue.
What Happens When a Partner Leaves the Partnership?
Florida law uses the term "dissociation" for events that cause a partner to leave a partnership. Dissociation can occur in several circumstances, including when the partnership receives notice of a partner's express will to withdraw or when an event identified in the partnership agreement occurs.
Dissociation does not always mean that the partnership must dissolve. When the partnership continues after dissociation, the departing partner generally loses the right to participate in management and the conduct of the partnership's business, and the partner's interest may need to be addressed under Florida law and the partnership agreement.
However, the type of partnership matters. For example, a partner's express will to withdraw from a partnership at will can trigger dissolution and winding up under Florida law. The partnership agreement and the circumstances of the departure therefore need to be reviewed before assuming that the remaining partners can simply continue the business.
Can the Business Buy Out a Partner's Interest?
In certain circumstances, Florida law requires a partnership to purchase a dissociated partner's interest when the dissociation does not result in dissolution and winding up.
Under Florida's partner buyout statute, the buyout price generally reflects what the departing partner would have received if the partnership's assets had been sold and the business wound up on the date of dissociation. The statute considers the greater of the business's liquidation value or its value as a going concern without the departing partner.
The amount can also be affected by money the departing partner owes the partnership, including certain damages arising from a wrongful dissociation. The partnership agreement, business valuation, assets and liabilities, and circumstances of the departure can therefore all affect a buyout.
Florida law also establishes procedures when the parties cannot agree on the purchase of the dissociated partner's interest. Because valuation and timing can directly affect both the business and the departing partner, obtaining legal and financial information before committing to a buyout can be important.
When Can a Partnership Dispute Lead to Dissolution?
A partnership dispute can lead to dissolution when the circumstances make continued operation legally or practically untenable. Florida law identifies several events that can result in dissolution and winding up, including events specified in the partnership agreement and certain circumstances in which a court orders dissolution.
For example, a partner may seek judicial dissolution when another partner's conduct makes it not reasonably practicable to continue operating the business together. A court may also order dissolution when the partnership's economic purpose is likely to be unreasonably frustrated or when the business cannot reasonably be carried on in conformity with the partnership agreement.
A disagreement, by itself, therefore, does not necessarily require dissolution. The nature and severity of the conflict matter, particularly when it involves misconduct, a material breach of the partnership agreement, or an inability to continue managing the business together.
How Should Partners Approach a Dispute Before It Escalates?
Start by reviewing the partnership agreement and relevant business records, identifying the specific conduct or decisions that caused the dispute, and considering which resolution options would allow the business to continue operating.
Depending on the circumstances, you may need to separate contractual issues from personal disagreements, determine whether a partner may have breached a legal or contractual obligation, and consider negotiation, mediation, a buyout, or litigation. Any proposed resolution should also be evaluated for its effect on the continuing business.
Some disputes may involve more serious conduct. Florida law permits judicial expulsion of a partner in certain circumstances, including wrongful conduct that materially and adversely affects the partnership, certain material breaches, or conduct that makes it not reasonably practicable to continue the business with that partner.
The appropriate response therefore depends on what is actually driving the conflict. A disagreement over a single business decision may require a different approach from a sustained management breakdown or conduct that materially harms the partnership.
Address Your Partnership Dispute With Kopp Legal PA
When a partnership dispute begins to affect your company's operations, you may need to balance the business relationship, financial interests, and the company's future as you determine what legal options are available.
At Kopp Legal PA, we work with business owners in Palm Beach Gardens, Florida, and throughout Martin, Broward, Hendry, Glades, and Okeechobee Counties to evaluate partnership disputes and potential solutions.
Our business law attorney can help you understand the applicable partnership rules, review the governing agreement, and consider whether a negotiated resolution, partner buyout, or other legal action may be appropriate for your circumstances. Contact us today to schedule a free consultation.
