What to Do When Your Business Partner Stops Paying Their Share

 Posted on December 04, 2023 in Business Law

Going into business with a partner often seems like a smart move initially. Combining resources can make commercial property acquisition possible. However, the arrangement can quickly become worse if one partner stops properly covering their portion of ownership costs. A Texas attorney can help you take the proper steps to respond when your partner stops paying their agreed-upon share.

Review All Partnership Agreements

Carefully examine any legal partnership contracts, operating agreements, property title documents, loan paperwork you signed together for the business real estate, and other binding agreements with your partner. Dig up and thoroughly review all signed terms related to each partner's division of financial obligations. 

Specifically note if the clear language requires your partner to cover a particular share of expenses like mortgage payments, property taxes, leasehold improvements, maintenance and repairs, etc. This documentation clearly outlining the breach of already-agreed payment responsibilities is crucial for showing bad faith later in legal proceedings to seek payment and restore your rights.

Demand Payment Immediately

Formally notify your nonpaying business partner that they are out of policy compliance by issuing written legal demand for payment letters outlining exactly which shared financial expenses are overdue. Spell out mortgage amounts unpaid, property taxes left delinquent, maintenance repairs or improvements the partner failed to chip in for, vacancy costs during unfinished leasing periods, and any other breached monetary obligations. 

Cite directly from existing operating agreements that state the partner's responsibility to cover their allotted 30%, 40%, or 50% (or otherwise agreed upon) share of costs associated with your jointly owned commercial real estate per Texas laws and business partnership acts. Provide clear payment due dates and terms to bring their accounts current.

File Court Papers to Recover Payment

Unfortunately, even legal demands often go unresolved, meaning civil action is necessary for holding accountable nonpaying partners. Work closely with a Texas business litigation attorney if your written requests for payment from your partner are ignored after reasonable time frames transpire. Take the step of filing formal civil suits stating clear breach of signed contracts and bad faith nonpayment. Make sure to gather all documentation that can support and quantify your requested damage amounts. 

Preparing For Court Proceedings

Once a business partnership sours over matters like a breach of financial obligations, court intervention often becomes inevitable to settle disputes. Your attorney will handle filing initial paperwork like petitions or complaints outlining the contractual breaches by your partner regarding their share of real estate expenses and investment payments owed. Gather irrefutable documentation under your lawyer's guidance to back claims. As your case proceeds, you may need to comply with discovery proceedings, depositions, settlement discussions, and more over months.

Contact a Bexar County, TX Small Business Lawyer

If your business partnership has deteriorated and you need legal guidance on moving forward, do not delay seeking legal representation. A San Antonio, TX small business attorney experienced with disputes can advise you on protecting assets and optimizing outcomes during formal dissolutions or forced buyouts. Call Geoff Mayfield, Attorney at Law at 210-535-0870 for a free consultation.