Business partnerships start with the best of intentions. Unfortunately, that optimism can fade, and one partner may want to leave before the remaining partner(s) is/are ready to call it quits. It can lead to anger and frustration, not unlike a couple who divorces. Regardless of feelings, it may also be a legal and financial problem, which prompts the remaining partner(s) to consider filing a lawsuit.
Can they sue?
The answer to this question involves several factors. At the top of the list is the language in the partnership or operating agreement. Often, initial contracts allow partners to leave when they want, even if it triggers closure or restructuring. Applicable state laws may also come into play.
Sometimes it is abandonment
There are certain circumstances remaining partner(s) have a strong case. Reasons for this include:
- The exiting partner violated their fiduciary duties.
- The method of their departure breached their contract.
- Their departure was for their gain at the expense of causing harm to the business.
- They committed fraud, theft, embezzlement or other crimes before or during their exit.
Litigation may not be the answer
The circumstances of each partner’s exit are unique to the company and partnership. Litigation can provide damages related to the harmful behavior, but judges are often inclined to let people have the freedom to work where they want. Moreover, overly strict contracts are often unrealistic in scope and unenforceable. Finally, the contract may indicate that mediation or arbitration are to be used to resolve disputes. Those considering leaving may want to discuss their exit with an attorney who can help minimize their legal exposure.