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What Causes Partnership and Shareholder Disputes?

Posted by Jonathan Krems | Nov 03, 2022 | 0 Comments

In this week's Freedom Friday blog and email newsletter, I want to talk about a topic that I've talked about before, and this is becoming a frequent issue with many of my law firm's clients.  I am seeing a lot of LLC members wanting to part ways with each other, most of the time amicably, but not always amicably.  I have handled several LLC restructurings in the last several months where they were going from a multi-member LLC to a single-member LLC and one of the LLC members was leaving the business.  However, I am also seeing a rising number of LLCs and even general partnerships where the LLC members, or the partners, want to part ways, but it's not amicable.  As I was telling someone at a recent Halloween party, this type of legal issue is called a “business divorce.”  Most people have never heard of a “business divorce,” but it actually is becoming just as common as a marital divorce.  I want to discuss this issue in a bit more detail in today's Freedom Friday blog and email newsletter, and so in today's Freedom Friday blog and email newsletter, I'm answering the question, “What causes partnership and shareholder disputes?”

Most disputes between LLC members, or business partners start out when they never clearly evaluate, communicate, negotiate, and/or memorialize their expectations of each other, especially regarding roles, responsibilities, money, and investment, and the very beginning of the business.  The last several months I have seen very poor examples of LLC operating agreements and partnership agreements which demonstrate to me as an attorney that a lot of issues were not thoroughly discussed at the beginning of the business relationship.  Many of these LLC operating agreements and partnership agreements were not drafted by an attorney but were drafted by the parties themselves using a DIY resource.  Unfortunately, I've also seen at least one partnership agreement which was drafted by an attorney, but he was only truly representing one of the business partners to the detriment of the other partner, who did not have her own attorney representing her interests in the process.

Also, even if a solid LLC operating agreement or partnership agreement is drafted, little time is spent by the LLC members or partners figuring out the day to day operations of the business, especially regarding issues like cash reserves, purchasing equipment, reimbursement of expenses, and similar issues.  Often times, one LLC member (usually the managing member but not always), or one of the business partners, is left pulling all the weight and the other member or partner is not involved in the day to day operations of the business, which wears the managing member or partner out --- and leads to a separation of the LLC members or partners, either an amicable one, or a “business divorce” in court.

Liberty Legal Solutions, LLC, represents LLC members and business partners who need assistance in either restructuring an LLC on amicable terms, or in litigation where it becomes necessary to the other LLC member or business partner.  We offer a free, complimentary consultation to discuss your options and see how we can help your business get back on the right track.

Thinking about starting a small business?  Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/

About the Author

Jonathan Krems

Jonathan is the Founder and Managing Attorney of Liberty Legal Solutions, LLC, a law firm dedicated to building, protecting, and defending the business and personal interests of our clients in Oklahoma.  Jonathan's primary practice areas are business law, contracts and agreements, business liti...

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