Partnership Disputes

Business Litigation Attorney Serving the State of New Jersey

Partnerships are created when two or more people go into business together. A partnership is different from a corporation or a limited liability company, in which the people who create the business are shielded from liability. In some cases, the business is a partnership in fact, even though the people involved have not created any sort of formal agreement. A partnership can also be subject to a written agreement. Disagreements are unfortunately not uncommon in a business run by more than one person. If you get into a partnership dispute, you should consider consulting New Jersey business lawyer Raymond A. Grimes.

Protect Your Interests During a Partnership Dispute

Many different issues can give rise to a partnership dispute, including financial strains, a breach of contract, a breach of fiduciary duty, succession concerns, or disagreements about how language in a partnership or operating agreement should be read or interpreted. For many partners, a dispute with their partner is extremely difficult. Often, a partner puts a lot of commitment and trust in a business partner, and if that trust is violated, it can be unsettling and put the business in a financially precarious position. An experienced business attorney can make a big difference to the outcome of a dispute.

Ideally, there is a written partnership agreement that clearly spells out the obligations and rights of all of the partners, including what should be done and which remedies are available if your rights have been violated. Sometimes it is possible for the partners to directly negotiate with each other, based on the language of the agreement. However, the language of the agreement may not perfectly fit the situation that arises.

A partnership agreement may include a provision that selects a dispute resolution mechanism with an eye toward avoiding excessive expense, and in that case, the chosen mechanism will govern the outcome. It may be difficult to sell a partnership interest to an outside third party, so the written agreement may require a partner who wishes to leave to sell their interest to existing partners or to offer their interest to existing partners first. In some cases, it may be necessary to bring a partnership dispute to a mediator, arbitrator, judge, or jury, who can interpret the partnership agreement and craft a determination based on it.

If there is no written partnership agreement in place, however, your rights and obligations will be decided under the New Jersey Uniform Partnership Act. Under the former version of the partnership statute, dissolution was the only remedy. The revised statute creates default rules in case there is no partnership agreement or in case it is silent on the issue that the partners face. An alternative to dissolution provided under the statute is dissociation. This allows a partner to withdraw without dissolving and winding up the business. This remedy is closer to the remedy for a minority shareholder of a corporation.

Dissociation can take place when a partner gives notice of their intent to withdraw, the other partners vote to involuntarily dissociate one of the partners under certain circumstances, or a court orders an involuntary dissociation when a partner materially breaches the agreement, engages in wrongful actions, or engages in conduct that makes it not reasonably practicable to continue the business in partnership with that person. The consequences of each type of dissociation are different.

Partnership litigation usually occurs in state court, where it can go to the Law Division, which has jury trials, or the Chancery Division, which allows for both monetary and nonmonetary relief. A case that winds up in the Chancery Division can result in the dissolution of a partnership and the sale of assets or a forced buyout, or it can result in an injunction against one or more of the partners. If one partner is oppressed by another partner, a receiver may be appointed. A dispute could also go to federal court, depending on the circumstances.

Retain a Knowledgeable Business Lawyer in New Jersey

If you are involved in a partnership dispute in New Jersey, you should retain an experienced attorney. The Grimes Law Firm represents clients in Neshanic Station and other areas of Somerset County, as well as throughout the tri-state area. Contact us online or call us at (908) 371-1066 to schedule an appointment with litigation attorney Raymond A. Grimes.

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