Partnership disputes rarely emerge suddenly. Recognizing early warning signs and understanding your options helps you protect your interests.
Key Takeaways
- Document concerns early
- Review your operating/partnership agreement
- Mediation may preserve relationships
- Buyout may be the best solution
Warning Signs
- Financial disagreements
- Unequal workload concerns
- Strategic direction conflicts
- Communication breakdown
- Trust issues
Judicial Dissolution: The Nuclear Option
When 50/50 partners cannot agree and the business is paralyzed (deadlock), and the Operating Agreement has no exit mechanism, the only option is often "Judicial Dissolution." You ask a judge to forcibly dissolve the LLC and liquidate assets. This is expensive and destroys the business value, but sometimes it is the only way out of a toxic partnership.
Fiduciary Duties
Partners owe each other "Fiduciary Duties"—Duty of Loyalty and Duty of Care. You cannot secretly start a competing business (usurping corporate opportunity) or pay yourself a secret bonus. Proving a breach of fiduciary duty is a powerful way to force a bad partner out or claim damages beyond just the contract value.
Piercing the Corporate Veil
Partners often think the LLC protects their personal assets (house/car). It does, UNLESS you commingle funds. If you use the business account to pay for your groceries or Netflix, a judge will rule the LLC is an "alter ego" and allow creditors to "pierce the veil" and seize your personal assets. Keep finances strictly separate.
Protect Your Business from Costly Legal Mistakes
A handshake deal is fine until things go wrong. Whether you're starting a company, negotiating a contract, or protecting your IP, you need clear legal agreements. Don't risk your hard work.
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Get Your Free Consultation NowCan I just fire my partner?
Usually no. You can fire them as an employee, but you cannot take their equity (ownership) without a "Buy-Sell Agreement" trigger (like 'Termination for Cause'). They will remain an owner entitled to profits even if they don't do any work, unless you have a vesting schedule.
Disclaimer: This article is for general information only and is not legal advice.