Do I have legal rights in a business partner dispute?
A partnership allows two or more persons to collaborate together to conduct business for profit. As a partner you will share the profits, losses, and assets of the business. Some partnerships are simply founded through oral agreements or a handshake. While other partnerships may include a contractual, written contract with a carefully worded partnership agreement.
Recently on our forum a user asked, “I own a restaurant with my partner. He owns 55% and I own 45%. He will not let me physically enter the restaurant. What are my rights?”
Different types of partnerships
A partnership is a business which has not consolidated or filed to become a corporation or a limited liability company (LLC). Partnerships can include general partnerships, joint ventures, and limited partnerships.
- General partnerships
General partnerships allow for all partners to equally share in the management responsibilities and profits.
- Joint Ventures
Joint ventures incorporate the same strategies as a general partnership (i.e., shared profits and responsibilities), but the partnership is formed for a specific time-period and purpose.
- Limited liability partnerships
Limited liability partnerships allow some partners to operate and control the business while the remaining partners simply invest money to operate the business and take a very limited role in management.
Creating a partnership agreement
Rights and responsibilities of the partnership are generally outlined in a partnership agreement. A strong partnership agreement should include:
- The duration of the partnership (i.e., including a specific date or dissolution at the time of death of one of the partners).
- The reason for the partnership (this can remain intentionally vague).
- Partnership contributions
- Information about the bank accounts used for the partnership
- Partnership compensation
- Management duties of each partner
- Work schedules, including hours and vacations
- Dispute resolution strategies (i.e., arbitration or mediation vs. litigation)
- Buy and sell agreement
What are my partnership rights?
Now, let’s take a closer look at the question discussed above. This individual has asked whether their partner has the legal right to bar them from partnership property. The user did not provide any information about their partnership agreement or whether an agreement exists (so we will assume there is not an agreement which specifically bars him from the property).
If there is not a partnership agreement which states otherwise, common property (which has been purchased with partnership assets) is considered common property, and owners generally have the right to enter the common property. They are also responsible to pay a proportionate share of the expenses, taxes, and repairs. This is also true for personal property which has been contributed to the partnership.
With this in mind, assuming there is not a partnership agreement which states otherwise, a business owner should have the right to enter a business which is part of the partnership. This remains true even if one partner is the minority owner of the property.
It may be time to talk to a business attorney and find out more about your rights under your partnership agreement.
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