When all shareholders, LLC members, or partners have a financial stake in a business, tensions are higher than normal, and, more complex when parties become involved in legal disputes.
Shareholder, Membership and Partnership Issues
Hi, I’m Reed Bloodworth, the managing partner of Bloodworth Law with offices in Orlando and Winter Haven, Florida. Let’s talk about frequent Shareholder, LLC Memberships, and Partnership Issues.
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, the managing partner of Bloodworth law in Orlando and Winter Haven, Florida. 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.