Dallas Business Partnership and LLC Disputes
Running a business with another person requires trust. When that trust breaks down, disagreements over money, control or the future of the company can quickly threaten the business itself. Dallas partnerships and LLCs may face disputes over management decisions, distributions or one owner’s conduct. A Texas business dispute lawyerpartn can review the governing documents and help an owner understand possible ways forward.
What causes disputes between business owners?
Business owners can disagree for many reasons. One person may believe they are doing more work but receiving the same share of the profits. Another owner may want to expand while the other wants to reduce spending or sell.
Money can also create serious conflict. An owner may question withdrawals from a company account or believe another person is using business property for personal purposes. Disputes can also develop when an owner stops sharing financial information or makes major decisions without the required approval.
Problems often become harder to resolve when owners never planned for what would happen if they stopped agreeing.
Why are the company documents so important?
The first place to look is usually the agreement governing the business. For an LLC, that may be the company agreement. A partnership may have a written partnership agreement.
These documents can establish who controls the company and how decisions must be approved. They may also address distributions, transfers of ownership or procedures for an owner who wants to leave.
Texas law gives LLC company agreements substantial power to control relations among the company’s members and managers. Current Texas law also permits an LLC agreement to expand, restrict or eliminate certain duties, including fiduciary duties. For that reason, owners should not assume that general rules will answer a dispute without first reviewing their agreement.
What duties can business owners owe each other?
The answer depends partly on the type of business.
Texas law expressly provides that partners owe the partnership and other partners duties of loyalty and care. Partners must also discharge their duties in good faith and in a way they reasonably believe is in the partnership’s best interest.
For LLCs, the analysis can be different. Duties may depend on the management structure and the company agreement. Texas law now expressly allows an LLC agreement to alter or eliminate duties, including fiduciary duties.
That makes the actual documents and facts especially important when one owner accuses another of self-dealing or misuse of company assets.
What can happen when owners cannot agree?
Not every disagreement requires a lawsuit. Owners may be able to negotiate a new division of responsibilities or agree that one person will buy out the other.
The company agreement may already contain a process for handling a deadlock or valuing an ownership interest. Some agreements also require mediation before litigation or require arbitration instead of court.
When negotiation fails, litigation may become necessary. Depending on the facts, a claim could involve breach of contract or breach of an applicable duty. Some disputes may also support claims brought on behalf of the company itself.
A Texas business dispute lawyer can determine which rights belong to the individual owner and which may belong to the company.
Can a court force a Texas LLC or partnership to close?
Texas law allows courts to order the winding up and termination of an LLC or partnership in certain circumstances. However, a serious disagreement between owners does not automatically mean a judge will shut down the business.
Judicial winding up is a significant remedy. Whether it is available depends on the circumstances and the requirements of the Texas Business Organizations Code. An owner should also check the governing agreement because another solution may be available.
For many businesses, preserving the company while resolving the ownership conflict may be more useful than ending it.
How can The Law Office of Sandy McCorquodale, P.C. help?
Consider a Dallas LLC owned equally by two people. One member controls the company bank account and begins making payments the other owner believes are personal expenses. The second member also claims that financial records are being withheld. Their company agreement requires both members to approve certain transactions. A lawyer could review the agreement and financial records, determine what claims may exist and explore whether negotiation or litigation is appropriate.
The Law Office of Sandy McCorquodale, P.C. represents business owners in disputes involving contracts, ownership and company operations. To discuss a partnership or LLC conflict with a Texas business dispute lawyer, call (833) 712-4472 or fill out the online contact form.