If you’ve been put in a position where your business partner is suing you, and you’re not sure what to do, you’re probably feeling many different emotions.
No matter how much time and care you, and a partner put into a business, there is always the possibility of bad things happening.
The results of a business litigation suit aren’t always predictable. However, having a reputable business lawyer on your side will help you get the best outcome.
If your business partner is suing, don’t panic. Here are some steps you can take to protect your business and peace of mind.
Grounds to Sue in a Business Partnership
If a business partner is suing you, they either know they have grounds to sue or believe they do.
Here are some common reasons behind business lawsuits.
Breach of Contract
Any time there is a breach in contract, the other partner has the right to sue. Proving this, however, is not necessarily as simple as it sounds.
If one or more terms are breached and legitimate damages result tied to that breach, the other partner technically has grounds to sue.
There are plenty of different types of agreements, including:
- Non-disclosure
- Intellectual property agreements
- Partnership agreements
- Shareholder buyout agreement
For more information on business contracts, read this blog or check out our other article, 7 Reasons Why a Written Contract is Necessary.
Criminal Activity
Criminal activity, including fraud, embezzlement, or theft, is typically legitimate grounds to sue for damages. However, this constitutes a breach of fiduciary duty, which means that the person acts in their own best interests instead of acting on behalf of the company, shareholders, and partners.
Abandonment or Negligence
If a partner is essentially not participating per standard contract details but still collecting pay, they could be sued. It must be proven that the defendant’s actions directly harmed the partnership.
Violation of Intellectual Property Rights
A violation of intellectual property rights such as a trademark or patent can be enough to sue. Check out this video for more information on intellectual property rights.
What to Do if a Business Partner is Suing You
If a business partner is suing you, there are various potential outcomes, including:
- Dissolution of the business
- Breach of contract liability
- Expulsion of a partner
- Settlement
If it comes to a point where your partner is taking action and suing, be sure to take the proper steps to protect yourself.
Hire the Right Type of Business Lawyer
Find a business lawyer who has experience handling the type of claim in question. During the consultation, they should guide you and answer your questions about the case and follow the most appropriate course of action to resolve the issue.
Make sure that you are handling all communications quickly; otherwise, the plaintiff could win the case. However, avoid communicating directly with the plaintiff (or defendant) until you have consulted with your lawyer.
Even if you have a small business or partnership, don’t try to resolve the case independently or through an inexperienced mediator.
Review Your Partnership Agreement
If you have a partnership agreement in place, this will probably be the first thing you look at if you get a notice of intent to sue.
It’s important to note that not everything here may be fully enforceable at a legal level.
Be Diligent About Record Keeping
Your lawyer may put a preservation order in place to help you protect important documents, including:
- Emails
- Web pages
- Social media posts
- Photos
- Videos
- Phone messages
- Chat messages
Do not destroy any documents without the advice of your attorney, and keep all records safe.
Stay Calm
If your business partner is suing you, of course, you will likely want to keep information of a potential legal case under wraps in general. But be sure, to be honest, with your lawyer. Give them all the information you think they might need, and then some.
Be diligent in regards to who you give information to other than this. In the meantime, try to remain calm and stay true to the business and your values. Your lawyer will handle the suit for you so you can stay on top of the business.
If a business partner is suing, are there alternatives to litigation?
Suing someone is the last recourse. Litigation can be costly and cause more friction than there already is. In addition, lawsuits can negatively affect your reputation and be time-consuming.
It’s entirely normal for one or both parties to think that they need to go to court, as emotions can run high. But there is often a way to come to a resolution without the high-stress situation of litigation.
Out-of-court settlements are often the results of a business litigation suit. Other alternatives include mediation and arbitration.
Consult with a business lawyer to get a clear picture of what will lead to the most favorable outcomes for all parties.
Hire a Business Lawyer Today
You want to believe that everything will be great if you’re just starting a business, but even the best partnerships can sour over time.
If you do get to court, we can help you get your case together, fight for your rights and protect the reputation of your business.
I’ve been helping small, medium, and prominent local and online businesses navigate and avoid legal mistakes for over 20 years.
Call toll-free 855-976-3783 today or book a consultation online.
If you liked this article, here are three more that might help:
10 Big Legal Mistakes Made By Startups
Important Legal Structures for Your Startup
Legal Advice For Startups That Are Recruiting And Hiring Employees
