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Handling a non-performing business partner

If a California business owner is dissatisfied with the performance of a business partner, certain actions can be taken to resolve the dispute. How the situation is dealt with depends on a variety of factors, including how the business is organized and the contents of any written agreements regarding this kind of situation.

When a company is organized as corporation, individuals who own the majority of its stock can generally vote on whether or not to remove a non-performing partner. If a company is legally designed to function as a partnership or the non-performing partner owns at least 50 percent of the shares in the company, this method is not valid.

Regardless of how a business is structured, it is typically in the best interests of its owners to try to resolve conflicts before pursuing the removal of a non-performing partner. Many companies have procedures that must legally be followed in the event a partner is not carrying out his or her duties properly. These procedures can vary from calling in a mediator to forcing the non-performing partner to sell back his or her interest in the business.

If there is no binding contract stating what to do with a non-performing partner or the partner in question is not cooperating with these provisions, a lawsuit can be filed in an effort to bring the conflict to an end. These lawsuits may culminate in the dissolution of a company or a forced buyout.

Due to the many complications that can result from disputes between business partners, many individuals going through such a situation choose to seek out legal advice. By working with an individual or organization that specializes in partnership disputes, business owners may gain direction and confidence by having professional assistance during every step of the process.

Source: Houston Chronicle, "How to Deal With a Non-Performing Business Partner", Terry Masters, December 17, 2014

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Klein & Wilson

Klein & Wilson
4770 Von Karman Avenue
Newport Beach, CA 92660

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