Preparing for a Partnership Breakup in Orlando, Florida

Put the agreement in place first

The time to prepare for a breakup is long before there’s any sign of one. If you’re about to go into business with someone, even a friend or a family member, put a written agreement in place first.

That agreement should say who owns what, who decides what, how profits and losses are shared, what capital contributions each partner is expected to make, how business assets are titled, whether disputes go to mediation or arbitration before court, and what happens when a partner dies, becomes disabled, wants out, or has to be pushed out.

If you’re already in a business with partners that’s going well but have nothing in writing, now is the time to formalize it. A partnership agreement attorney Florida owners can meet with in person will draft one that reflects the deal you actually made.

Common reasons disputes arise between business partners

What are the common reasons for disputes between business partners, and what can you do when disagreements start to arise frequently? Here is what we see most often:

• Communication has broken down. Meetings become arguments or stop happening at all. When partners can’t talk about the business, they can’t run it together.
• The partners no longer share the same goals, or one partner wants to leave. One wants to grow and reinvest; the other wants to take distributions. One wants to sell; the other wants to hold. Disagreements about direction rarely resolve themselves.
• Contributions have become unequal. One partner is putting in the hours, the money or both while the other has stepped back. Resentment over unequal effort is the most common reason for the dispute we end up handling.
• Money is moving without explanation. Unexplained draws, side deals with vendors, or a partner who has quietly started a competing venture are more than warning signs. They may be breaches of the fiduciary duties partners owe one another, and in serious cases they amount to embezzlement.

The decisions a breakup forces

A business divorce means hard decisions: whether to split the company into two, whether one partner buys the other out, and how to value the business fairly. A business partnership dispute lawyer at Legal Counsel, P.A. helps you make those decisions with the leverage the law gives you.

Partnership Breakups: Your Options

If you and your partner have decided to part ways, or one of you has decided for both, consider your options with a partnership disputes lawyer before you act. Michele Diglio-Benkiran and the attorneys at Legal Counsel, P.A. can help you understand where you stand and craft a solution that’s right for you and for the business, and we’ll give you formal legal advice rather than a guess.

Buyout, split, or something short of a breakup

• Buy the business or sell your share. When the business can’t be divided without destroying it, one partner buys the other’s interest. This produces a clean break, but only with a binding purchase agreement that documents the price, the payment terms, the release of claims and any non-compete. Our business sales practice handles the transaction side of a buyout.
• Dissolve the company, split the assets, and go separate ways. When each partner has their own clients and the shared assets are limited to things like real estate, equipment or inventory, the company can sometimes be divided. Even where the partners are closely entangled, a lawyer can help negotiate a division of clients, contracts, property and debt. It takes negotiation, and it takes documents, and we handle both, in or out of court.
• Other solutions. Not every dispute or disagreement requires a full breakup, and alternative dispute resolution is often the better route. Sometimes one partner’s share is reduced, a management role changes hands, or a disagreement over a specific decision is resolved and the business continues. We look for the outcome that fits before recommending the most drastic one.

What Florida law does when partners haven’t agreed

A Florida general partnership without a written agreement is governed by the Florida Revised Uniform Partnership Act, which sets the default rules on how partners leave and how they’re paid. A partner can dissociate by giving notice. In a partnership at will, that notice can trigger a dissolution of the company and a winding up of its affairs.

Where the business continues without the departing partner, the statute requires the remaining partners to purchase the departing partner’s interest at a price based on what that partner would have received if the business had been sold as a going concern or liquidated, whichever is greater.

It also puts a clock on the negotiation: if there’s no deal within 120 days of a written demand, the business must pay its estimate of the buyout price. A partner who leaves in breach of contract can owe damages and may have to wait for payment.

LLCs and corporations follow different rules

Businesses organized as LLCs follow a different statute, the Florida Revised Limited Liability Company Act, where the operating agreement controls and, absent one, a member’s exit and the possibility of judicial dissolution are governed by default rules. Corporations follow the Business Corporation Act and the shareholder agreement. Which set of rules applies to you is the first thing a shareholder and partnership disputes lawyer checks, because the answer changes the strategy.

Breach of fiduciary duty between partners

In every form of business, partners and members owe one another fiduciary duties of loyalty and care. A partner who diverts business opportunities, competes against the company, uses company funds for personal purposes or hides financial reporting from the others has likely breached a fiduciary duty.

The business can recover damages for that breach of duty, and the claim often travels alongside a breach of contract claim under the written agreement itself. These are among the most common causes of action in a business divorce. Our article on breach of fiduciary duty claims explains what it takes to prove one.

If you think a breakup is coming, protect your interests early. Legal Counsel, P.A. represents Orlando business owners through partnership breakups while protecting their ownership, their business and their rights.

Why Work With Legal Counsel, P.A.

These cases sit at the intersection of contract law, business law and litigation, and our law firm practices all three. A litigation attorney who has also drafted the underlying agreements knows where the disagreement usually starts. Michele Diglio-Benkiran founded the firm and has practiced business and real estate law since 1999, which matters when the company’s main asset is a building or a portfolio of rental properties, as it often is.

Richard Sierra is a commercial litigation and bankruptcy lawyer with more than three decades of experience, and partner disputes that involve insolvency or a partner’s bankruptcy are squarely in his background.

Results matter, and so does knowing when to settle. We offer a free consultation, and pay later options are available for clients who qualify.

Serving Orlando and Central Florida Business Partners

We represent partners, members and shareholders in Orlando and throughout Orange County, and across Central Florida from our Winter Garden, Orlando and Seminole offices, including Seminole, Osceola, Lake and Polk counties. Contested cases in Orlando are filed in the Circuit Civil Division of the Ninth Judicial Circuit at the Orange County Courthouse. Our litigation team handles these cases as part of our broader business litigation practice.