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Was it a breach of your partnership agreement to force you out?

Aug 17, 2022 | Business Litigation

When you invest in a new business or leave your job to focus solely on a startup, you take significant personal risk. Although the promise of possible compensation is there if you succeed, you and your partner both gamble on the success of the concept and of your cooperative enterprise. You may work long hours without direct pay and make personal sacrifices to fund the new company.

When the business becomes successful, you and your partner may both reap the benefits, or they may seek a means of making those benefits solely their own. Can your partner force you to exit the business without your consent?

Unless you have made arrangements, dissolution may be necessary

Your partnership agreement may talk about very specific terms for when your partner wants to take over the business or close the company. You may have required a business valuation and then a division of the company’s value or resources based on your contributions to the company. Alternatively, you may have put rules in place that the partnership can no longer exist and will instead require dissolution if the two of you cease cooperating with one another.

Dissolving an existing partnership and starting a new business will mean a little bit more effort for your partner, but it will make a clear break and absolve you from any future obligations to them or liability for the company. Of course, if they move to dissolve the company without first discussing it with you or offering compensation, they may have violated your agreement or your rights as a co-owner.

If your partner doesn’t follow the appropriate procedures and instead pushes you out while keeping the company operating or closes the doors without your knowledge, you may need to take them to court.

A judge can compensate you for the breach of your contract

When one business partner violates the partnership agreement governing the business relationship, there may be penalties outlined in the agreement itself. The courts may also award damages to a partner unfairly removed from a business or deprived of income and their ownership interest in the company.

Reviewing your partnership agreement will be an important first step if you plan to take your partner to court over how they pushed you out of the business.