Partnerships can be the foundation of a successful business, offering a mix of skills, resources,
and shared goals. However, when disputes arise among partners, they can put the entire business at risk. At Hayes Hunter PC, a leading Houston law firm, our experienced Houston attorneys are well-versed in handling complex partnership disputes. We are dedicated to guiding you through these challenges and helping protect your business interests.
Common Causes of Partnership Disputes
- In Houston and beyond, partnership disputes can arise for several reasons, ranging from financial disagreements to differing visions for the business. Some of the most common causes include:
- Breach of Fiduciary Duty: Partners in Houston and elsewhere owe each other fiduciary
duties, including loyalty, care, and good faith. A breach of these duties—such as
diverting business opportunities or misusing company assets—can lead to significant
legal disputes. - Disagreements Over Financial Contributions and Distributions: Partners may have
conflicting views on profit distribution or financial contributions, especially during
economic downturns or times of financial stress. - Conflicting Business Visions: Disagreements about the direction or strategy of the
business are common. For instance, one partner might want to expand aggressively while
another prefers a more cautious approach. - Lack of a Clear Exit Strategy: Entering a business relationship without a well-defined
exit plan can complicate disputes, particularly when one partner wants to retire, leave, or sell their interest.
Mitigating Risks Through a “Corporate Pre-Nup” – Buy-Sell Agreements
One of the best ways to mitigate the risk of partnership disputes in Houston is by creating a clear buy-sell agreement (BSA) at the outset. Often referred to as a “corporate pre-nup,” a buy-sell agreement outlines the terms and conditions for a partner’s exit. A well-crafted BSA can prevent disputes from escalating and potentially jeopardizing the entire business. Key elements of a BSA include:
- Triggering Events: Clearly defined circumstances under which a buyout can be
triggered, such as death, disability, retirement, or a partner’s desire to exit. - Valuation Methodology: A predetermined process for valuing the departing partner’s
interest, which may involve a third-party appraiser to avoid disputes over the business’s
worth. - Payment Terms: Details on how the buyout will be financed, whether through
installment payments or a lump sum, and any applicable interest rates. - Dispute Resolution Mechanism: Provisions for resolving conflicts through arbitration or
mediation rather than costly and lengthy litigation.
A well-drafted BSA by a skilled Houston attorney from Hayes Hunter PC can help manage potential disputes effectively, ensuring all parties understand their rights and obligations.
Legal Remedies for Partnership Disputes in Houston, Texas
- Even with a buy-sell agreement in place, disputes may still occur. Under Texas law, there are several remedies available for partners involved in a dispute:
- Derivative Actions: If a partner believes another partner’s actions are harming the
business, they can file a derivative lawsuit on behalf of the company to address issues
like breach of fiduciary duty. - Receivership: In extreme cases where continuing the business is impracticable due to
conflicts, a court may appoint a receiver to manage the business until a resolution is
reached. - Direct Lawsuits for Breach of Contract or Fiduciary Duty: Partners can sue directly
for damages caused by another partner’s breach of the partnership agreement or fiduciary duties.
Why Choose Hayes Hunter PC, a Houston Law Firm, for Your Partnership
Dispute?
At Hayes Hunter PC, our Houston attorneys are experienced in handling the complexities of
partnership disputes. We bring a strategic approach to each case, aiming for efficient resolutions that protect our clients’ business interests. Whether through negotiation, mediation, or litigation, we strive to achieve the best possible outcome for our clients in Houston and beyond. If you are facing a partnership dispute or need assistance drafting a robust buy-sell agreement, contact Hayes Hunter PC today to schedule a consultation with a skilled Houston attorney. Let us help you safeguard your business’s future.
