Business relationships are susceptible to dispute just like family or social relationships. When two or more people have a partnership agreement in Wisconsin and are struggling to work together through a business dispute it can be difficult, if not impossible, to remain productive. If work disagreements eventually become an insurmountable roadblock the partners inevitably ask what they can do to get out of the situation. There are several possible avenues the partners can take to either attempt to fix the partnership dispute or end their business relationship. This article will give a broad overview of possible solutions if you are struggling with a business or partnership dispute in Wisconsin.
To learn more about different business entity types, read our article here.
What Kind Of Business Agreements Can Be Resolved?
Ideally you and your partner will have a partnership agreement in writing. A written agreement with fully negotiated terms is never a waste of time or money and if disputes arise it can provide a previously agreed upon roadmap on how to resolve them. Another possible instrument would be an operating agreement or a simple contract. The point of having something in writing is to establish what the parties are agreeing to become involved with and their mutual understanding of the arrangement. Although you may be going into business with a good friend and feel comfortable with an “informal” or verbal agreement having a written agreement protects everyone in the long run.
Partnership Agreements formed prior to January 1, 2018
Wisconsin passed a new act governing partnerships as of January 1, 2018. Most partnerships are subject to the act if they did not elect in writing to be governed by the previously existing law and notify the Wisconsin Department of Financial Institutions that they did not want to be governed by the new act.
Partnership Agreements formed after January 1, 2018
In the event that there is no agreement between the partners in writing or if the agreement is not complete and leaves unanswered questions the Wisconsin Revised Uniform Partnership Act will take effect by default. The Wisconsin Revised Uniform Partnership Act (“WUPA”) governs the terms of a Wisconsin partnership agreement and fills in any omissions in a written agreement as well. No partnership formed in Wisconsin can have terms that are contrary to WUPA.
Business Dispute Mediation
If there is a mediation provision in your partnership agreement then you are obligated to attend mediation in a good faith attempt to resolve the dispute between you and your business partner. Mediation is a collaborative method used to attempt to resolve disputes between parties instead of resorting to litigation. Mediation can also be very effective because the parties work together to come up with a plan, they can both live with, instead of being subject to a court order that they are required by law to adhere to. If the agreement does not have a mediation provision you should still explore mediation as a first step in resolving your Wisconsin business partnership dispute.
Business Buyouts To Resolve Disputes
If you cannot resolve your dispute with your business partner you have the option to buy that partner out. Ideally, a buyout provision was included in your partnership agreement and/or operating agreement. If there is a buyout provision in writing then all you have to do is follow the steps in the agreement. If there is no provision for buyout and the other partner is stonewalling the buyout attempt, you will be forced to litigate. Prior to any buyout is it important to have a business valuation conducted by a disinterested third party so that you have a complete understanding of the numbers involved prior to agreeing to a buyout or, if you are forced to litigate, asking the court to issue a ruling on the buyout?
Selling A Business To Resolve Disputes
If all the partners have reached the point where they simply do not want to continue with the business there is always the option of selling the business. Depending on the structure of the business the partners can either sell to an existing employee or to a competitor. Usually, the competitor will be the motivated purchaser with the available funds to purchase within a reasonable amount of time.
Liquidating A Business To Resolve Disputes
If the partners cannot agree to a buyout or to sell to a third party, they may be forced to liquidate and divide the remaining assets after creditors and vendors are paid. If disputes are ongoing and profit is down choosing to liquidate may be the only option to avoid the stressful and, at times, expensive option of filing for bankruptcy.
The process of winding up business and dissolving the partnership does take time. The valuation and liquidation of the business assets along can take several months depending on the size of the business. Furthermore, the debts and the responsibilities of the partners do not end when the winding down process begins, the partners are “on the hook” until the business is 100% concluded so in other words, liquidation is not a quick fix and comes with its own set of challenges to be dealt with.
Change the Business Agreement To Resolve Disputes
You always have the option of amending your partnership agreement as long as it in compliance with WUPA. An example would be changing the responsibilities of a partner or creating a protocol to address a partner not performing a certain duty under the agreement.
Litigating a Business To Resolve Disputes
You can force a buy out or a sale by filing a petition requesting that the court become involved. You can also use a lawsuit to bring to light conflicts that led to the breakdown of the partnership. Some possible causes of action would be breach of fiduciary duty, fraud, misrepresentation and diversion of company assets. If your goal is that the partnership be dissolved the court can dissolve the partnership but keep in mind that a judicial dissolution of a partnership is equitable in nature, which means that the court can do what is ascertains is “fair” in light of the surrounding facts and evidence presented.
What You Can Expect From A Business Dispute Your Attorney
If you and your business partner have a dispute you should meet with a Wisconsin partnership dispute lawyer to discuss your options. An attorney experienced in handling Wisconsin partnership and business disputes will carefully evaluate the situation and provide you with the options available to you to make an informed decision. Furthermore, many of the potential solutions to partnership disputes involve the assistance of experienced counsel. If you have questions regarding partnership disputes in Wisconsin, please don’t hesitate to give us a call.
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