Frequent Shareholder, LLC Memberships, and Partnership Issues

Attorney L. Reed Bloodworth Founder and CEO of Bloodworth Law explains that frequent shareholder, LLC memberships, and partnership agreements should be established before a business begins.

When all shareholders, LLC members, or partners have a financial stake in a business, tensions are higher than normal, and, problems more complex when parties become involved in legal disputes.

All Businesses Have Financial Disputes

Businesses of all sizes and organizational types run into financial and contract disputes which escalate when the parties don’t get advice early on about their legal rights.

There may be a balance in power or a financial structure bringing the parties together, but that doesn’t mean that fairness, objectivity, and equality will rule actions. Sides may divide and then disagreements become larger.

Standoffs and Negotiation Stalls

Shareholders, LLC members, and partners may end up in a standoff where negotiations stop. The parties can’t resolve the ownership of an idea, the financial benefit of a business, the ownership of a property or another entity.

Shareholder, LLC membership, and partnership agreements should be established before a business begins. Have an attorney review your agreements before signing so that your interests are protected after the business is running, there are many issues that can arise.

Disrespect of Minority Shareholders

For example, minority shareholders or LLC members are at a disadvantage from the start.

Investments may be tied up and at the whim of majority owners. Minority owners can bring suits against the majority owners for a multitude of issues

Breach of Fiduciary Duties

Another common issue that arises is a breach of fiduciary duties. Shareholders, LLC Members, and partners owe fiduciary duties to each other. Shareholders, LLC Members, and Partners are required to deal with each other honestly, but when an owner takes an action that benefits him or her to the detriment of the other owners, it can trigger major disputes.

Breach of Governing Agreements

Next, breaches of the governing agreements can lead to major disputes. For example, a shareholder selling his or her shares in violation of the shareholder agreement to a rival or competitor. Other breaches can include one shareholder desiring to terminate the entire agreement against the wishes of other shareholders.

Finally, disputes often arise over the direction of the company. We often see these disputes arise in small- to medium-sized family-owned businesses.

Again, I’m Reed Bloodworth, Founder and CEO of Bloodworth law in Orlando. If you’re a shareholder, LLC member, or a partner in a business and you’re having issues with your fellow owners, give me a call, let’s talk about how Bloodworth Law can help you.