Common Disputes in Texas Business Partnership Breakups

 Posted on October 04, 2023 in Estate Planning and Probate

When a business partnership ends, disputes often arise around asset division, valuation, contracts, and compensation. Understanding the potential areas of disagreement can help partnerships end more smoothly with a Texas lawyer.

Dividing Assets and Property

One major source of partnership breakup disputes involves determining ownership and dividing tangible and intangible assets. Equipment, machinery, intellectual property rights, customer accounts, and real estate can all spark competing claims, especially if contributions are unequal or partnership interests are informal. Coming to an agreement on who gets what assets without extensive litigation often benefits all parties.

Disagreements Around Business Valuation

Figuring out the total current value of a Texas business being dissolved is a key step for a fair and equitable separation. However, partners rarely see eye-to-eye on valuation methods or accounting specifics. For example, disputes may arise regarding how to treat accounts receivable, determine inventory value, calculate goodwill, or handle minority share discounts. Hiring a professional forensic accounting and independent business appraisals upfront when initially separating can prevent prolonged financial disputes down the road.

Handling Existing Contracts and Debts

Following a partnership breakup, the remaining contracts, obligations, and debts of the business must be addressed. Partners may argue over who takes responsibility for supplier agreements, pending client projects, equipment leases, real estate leases, loans, credit lines, and tax liabilities. Ideally, these liabilities and commitments should be allocated clearly on paper from the outset of the separation process to avoid misunderstandings.

Disagreements Around Final Compensation Distribution

Texas partners often end up disputing final compensation distribution, especially if they contributed unequally financially or put in different levels of sweat equity and hours. Areas commonly sparking compensation conflicts include reconciling salaries, dividing profits and losses, repaying shareholder loans, and reimbursing expenses. Independent analysis of capital accounts and earnings by a business attorney can uncover imbalances and provide objective support for compensation claims.

Contact a Bexar County, TX Small Business Lawyer

Avoiding extensive litigation, which drains time and money, benefits all separating partners. This requires proactive conflict resolution, detailed documentation, and a willingness to compromise. Working with a San Antonio, TX business attorney can help you mediate disputes in a dissolution and prevent complex lawsuits down the road. With the proper legal guidance, many common partnership breakup disputes can be settled out of court.

Call Geoff Mayfield, Attorney at Law at 210-535-0870 to get started with a free consultation and learn the next best step you should take.