When you first sit down with your business partners to come up with your business plan, everything is typically rosy. Like any relationship, the story usually begins with the joy and excitement over creating a new business. But, like any relationship, it takes two to tango. Eventually, every team will run into disagreements or differing opinions on how best to grow the business. Some teams will be able to work out those disputes on their own, and others need help. So where do you go when you need help? It depends on what the issue is, but usually a business attorney is the right place to start. San Francisco based Coepio Legal provides trusted business litigation to help you work through any disputes.
How do you resolve it?
When you first signed the paperwork to create your business together (you did do that, right?), you likely made promises to the other owners about how the business would operate. Even if you never signed any paperwork, and you simply agreed to get the business going and share it equally with your business partners, you may have unintentionally created a general partnership with its own set of operating rules. Whatever entity you intentionally or unintentionally created carries certain rules about how that business operates. Those rules are either written in the California statutes, or contractually created with your business partners. You are required to follow those rules when trying to resolve any disputes with founders.
What does the process look like?
Here is an example scenario: Andrea and Becky own a restaurant together with a 50/50 split. Becky wants to open up on Mondays for service to generate more revenue, but Andrea believes Mondays are too slow and it would hurt the business. Andrea and Becky are becoming increasingly frustrated with each other and need help figuring out how to resolve their dispute. What are their options?
The first step is to identify what type of business entity the two partners have, and then determine what rules they need to follow. If Andrea and Becky are equal members in an LLC, and Becky was designated as the manager of the LLC, then Becky would likely have the final say on what days the restaurant will be open for service. If Andrea and Becky are in a general partnership, and they agreed Becky would be the chef while Andrea would manage everything else, then Andrea would likely have the final say.
What if Andrea and Becky agreed to make all decisions as equal partners, or never addressed who would decide day to day decisions like the hours of operation? In that situation they are stuck between a rock and a hard place. Ideally, they would have drafted a partnership agreement explaining what rights and duties each partner would have to prevent this situation. There are still options for resolving this dispute such as mediation, negotiating an agreement over who will decide the open hours, or dissolving the partnership. Even if it feels like an emergency-level legal situation, there is hope.
How can you help with my dispute?
A business attorney can let you know what rules apply to your situation, and advise you on your options to resolve the dispute. Every business dispute is unique, which is why we offer a free consultation to determine if we are the right business attorneys fit to assist with your dispute. If you are having trouble with a founder dispute, or see a dispute brewing on the horizon, please give us a call to see how Coepio Legal we may be able to help.