There are times when the saying "all good things must come to an end" rings true. In the business world especially, while you want to think it could never occur, you and your business partner might get to this point. As a partner in a general partnership agreement or a limited partnership agreement, you want ensure that your partner does not breach this agreement. In the event that this occurs, you want to make sure that you are protected.
Partner vs. Limited Partner
In Maryland, a partner is a person who co-owns a for-profit business with another person. In a general partnership, the partners are all liable for business debts. A limited partnership will have at least one general partner and at least one limited partner. The general partner’s role is the same as if it were a general partnership; however, the limited partner’s liability is limited to the extent of the ownership. Many times these partners are not responsible for the management of the partnership.
When partners are entering into an agreement, it is essential that they lay out in the partnership agreement what to do in the event of a breach. Many partners want to believe that it will never get to this point; however, if there is a section of the agreement that addresses breach, this may help to prevent a breach from becoming more time-consuming and a financial burden than it should be.
How to Handle a Breach in a Partnership Agreement
When one partner breaches a partnership agreement, the other partner has the ability to take action. This action may involve whatever is outlined in the agreement. For instance if the partnership agreement contains a caveat that allows for expulsion then this is a potential action that can be taken. This caveat will outline how the partner can be expelled and how compensation for the partner’s portion of the business will work. The partner can also take action against the other partner by suing him or her. The suit can either be to enforce the agreement or get rid of the agreement altogether because of the breach.
In the case that a person feels that a partnership is worth salvaging, then the partners may try to reach a settlement agreement. In the event that you no longer want to continue a partnership, then you can dissolve the corporation. You will still be able to keep your business; you will just have to prepare new "articles of incorporation".
Whether you want to go after your partner for what he or she did or you want to try to resolve the breach, you will want to consult with an attorney who has handled these types of cases before. An attorney can advise you on issues that will help protect your business and your financial interests.
Maryland’s Partnership Dispute Attorney
If you are in the process of entering into a partnership or you have a partner that recently breached a partnership agreement, an experienced partnership dispute attorney can help you come out on top. Our attorneys at The Casper Firm have aided business owners in solving partnership disputes. If you are interested in consulting with one of our attorneys, please do not hesitate to contact 410-989-5097.