How much can you – or do you – trust your business partners? If you had to think about that question, you should ask yourself why. When most people enter a business together, they pull together, sacrifice together, and hope to dominate their part of the business world together. Perhaps they do. But sometimes, somewhere along the way, things do not go as planned.
As business lawyers working in this area, we are familiar with how ego, greed, jealousy, and other reasons may lead one partner astray to put his or her interest ahead of the business.
The reasons for a partner or shareholder going astray does not matter. The resulting consequence of such conduct to the business does.
Opportunities that belong to the business are suddenly moved or taken away. It doesn’t matter if your business is structured as a corporation, an LLC, or a professional entity. It doesn’t matter if the business is for a service company, restaurants, CPA firms, engineering firms, or even law firms. The obligations of an equity member – call them a shareholder, partner, member, etc. – if they are in a controlling position with the business, require them to act in the business's best interest.
Some of the signs that the controlling shareholder or partners may be up to no good soon become apparent as follows:
- Restricting a partners/shareholder’s access to financial data.
- Making excuses to deny access to the books and records of the business.
- Contracts, pricing information, and other sensitive business information are taken to the controlling group’s other business.
- The control group has their friends and family in sensitive positions in the company, getting paid from the business coffers when they have little or no experience.
- The controlling group hires its CPAs and lawyers to engage in tactics that are inconsistent with the business objectives
- The smaller voting block of partners is intentionally frozen out of company decision-making and operations.
If you believe that your business partners or the control group of the business are engaged in activities that appear to be illegal, fraudulent upon you, or are simply oppressive to you or the smaller group of members, you must act quickly.
The business may be the single largest investment in your life. A venture in which you invested significant capital, effort, and time. The former best friend/relative is now clearly in the opposite corner and trying to leverage control and operation of the business. It is up to you and other like-minded partners/shareholders/members to act quickly.
Fiduciary duty litigation is technical, expensive, and emotionally draining, but the failure to act is not merely ceding the field, it may forever cost you your proper rights in the business.
More importantly, the failure to timely act to protect the business and their interest may be seen as an inexcusable delay, and a judge may not be sympathetic to your plight.
We look forward to speaking with you about any concerns you have about a potential partnership dispute. At the Vethan Law Firm, P.C.