Partnership Disputes

Every partnership begins with a sense of optimism. There is a reason you and your business partner are working together; you want to combine your strengths and work together to solve problems. What most partners fail to realize is that unresolved disputes can tear at the foundation of their business model.

Under Texas law there are certain obligations attached that place considerable responsibility on one or both of the partners. The Texas Business Organizations Code, together with your partnership agreement, determines the rights and obligations of both partners.

What is the difference between a general and limited partner?

In Texas a limited partnership has to have at least one general partner and at least one limited partner. There are differences between a general and limited partner. If there are any partnership debts, a limited partner is able to limit his or her personal liability to the amount that he or she has personally invested in that partnership.

However, the limited partner, because liability has been limited, is not in the position to exert any control over, or even help, in the management of the business. The general partner retains the control and therefore manages the businesses, and as a result has personal responsibility for any partnership debts.

In Texas, business partners are required by law to uphold a high level of fiduciary responsibility to each other. This, put simply, refers to the trust business partners place on each another in all affairs that relate to any financial interests and ownership rights. Partners are accountable to other partners when it comes to communication, financial transactions and other ethical requirements.

A dispute arises between partners when there is:
  • A conflict over expenses of a partner.
  • A conflict over contraction or expansion in the partnership
  • Changes in the economic environment
  • A time when one of the partners wishes to leave the business.

The first reaction to a partnership dispute is to work together to resolve the problem. If you suspect your partner may have done something illegal, or may have tried to take advantage of you, then you should talk with a lawyer who is experienced in partnership law.

As with many relationships, minor disagreements will inevitably take place sooner or later between partners. Normally, with some tactful diplomacy and discussion, resolutions can be found. However, if a stalemate has been reached, then the dispute needs to be resolved by the help and guidance of Texas business lawyer.