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Arizona Partnership Disputes

Arizona Partnership Disputes

Partnerships have many of the attributes of a marriage, including the fact that, as time goes by, the partners often drift in opposite directions. When that happens, disputes between the partners are inevitable. Unfortunately, disputes between partners can easily end up being harmful to the reputations of all the partners involved when the news is disseminated to the public, as it usually is. Resolving the dispute as quickly and painlessly as possible should be the goal of all involved.

Typical Disputes

The majority of partner disputes stem from one or more of the following:

  • Weaknesses in the original partnership agreement; major contingencies may have been ignored, or “implicit understandings” totally omitted
  • The partners have simply come to view the business and its future differently
  • One or more partners is acting improperly—misusing business resources, embezzling, overstepping boundaries, etc.

A common cause of conflict is the departure of one or more partners. If some want to leave the partnership or have died, it's not unusual for the people involved to have different opinions about how this affects the partnership and what the financial consequences will be. Attempts by some partners to “expel” others are obviously even more likely to generate disputes, and those disputes are likely to be acrimonious.

Options for Resolving Disputes

The first question that must be answered by a partner in the midst of a dispute is “what outcome do I really want from this?” It helps to have an experienced Arizona attorney involved when that decision is made, to ensure that you really understand your options.

If you don't want to continue in business with your partners, there is little sense in exploring the possibility of adjusting roles in the business or amending the partnership agreement. If continuing on in business is a possibility, by far the most productive approach is to begin negotiating. What terms can we add to the agreement, what changes in duties might make everyone happier?

When the relationship cannot be salvaged, for whatever reason, there are a variety of ways to proceed: Business dissolution, buyouts by one or more of the partners, selling to a third party, and, if necessary business litigation.

Potential Complicating Factors

The dispute does not always stay at the level of the partners. It often spills over to the entire staff of the business, lowering morale, reducing effectiveness, and splitting employees into camps supporting one side of the dispute. And that doesn't even mention that:

  • The partnership's funds may be dissipated by the costs of the dispute.
  • A truly bitter dispute may include deliberate acts of sabotage against the business.
  • Any number of other problems may come up to further complicate resolution of the dispute, especially as news of it leaks out to the local business community:
  • Lenders may be less willing to provide funding to a business with an uncertain future.
  • Suppliers may be less willing to provide material on credit, and may insist on more onerous credit terms if they do continue supplying.
  • Staff may leave to avoid the tension and uncertainty, and hiring new staff may be more difficult.
  • Claims by the partners against each other may trigger added scrutiny from oversight agencies, tax authorities, and the like.
  • Claims by the partners against each other may trigger legal, even criminal, actions against the   company.

Legal Help for Partnership Disputes

No one wins a protracted struggle to the death of a partnership. Getting experienced attorneys involved early can help reduce the tensions and improve the chances that the business can survive the partnership dispute. If your partnership is on the rocks or heading toward them, contact McKay Law for a free consultation at 480-681-7000.

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