Business disputes can require a considerable amount of resources to be devoted to their resolution. Business owners need to be careful when working on these issues.
Many Arizona businesses have several different people involved in the ownership group. Some have multiple individuals playing an active role in day-to-day operations, and this can sometimes lead to problems when concerns develop over a particular course of action. These issues could result in significant disputes between the members of the ownership group.
There are many reasons why a dispute can arise between the co-owners of a closely held corporation, a limited liability company or a partnership. Perhaps one individual made a decision that threatened the potential profitability of the entity. One owner might be thinking of leaving the business, and considering selling his or her ownership interest, leading to disagreements over departure and potential new investors.
Prudent business owners realize the impact that these problems can have, and create strong written operating plans at the time of formation, i.e., shareholder agreements for corporations, operating agreements for limited liability companies and partnership agreements for partnerships. This gives everyone clear guidance regarding the management of the business and what happens when disagreements, death, disability or desire to end the business occur. However, if the businesses have no such agreements in place, future disputes could lead to extensive and expensive litigation.
For example, owners may allege that one of them engaged in bad faith conduct that constitutes a breach of fiduciary duty, claiming that the person acted in a way that put his or her interests ahead of those of the company causing economic harm to the company.
The courts or eventually a jury may need to decide the dispute. These disputes can be very complex, and take years to bring to a close. Such litigation may cause the owners and the business significant expenses to litigate.
The sooner these matters are addressed, the more likely the company can continue to flourish. Even if the business has not prepared a governing agreement between the owners, the business owners can always take action to protect themselves in the future by having an agreement between them drafted and signed.
Whether you have a governing agreement between the owners or not, if you have issues connected to a dispute among co-owners, it is important that you speak to an experienced business law attorney as soon as possible. You need to take immediate action to protect yourself, and the interests that you have in the business. Failing to take steps to protect your interest could have serious impact on your investment and future income from the business.
Keywords: business law, business disputes, business formation