Business Partnership Disputes: When to Call a Lawyer

Most business partnerships start with shared goals and a good working relationship. Problems tend to surface later, when the business grows, money gets tight, or one partner’s plans change. Some disagreements resolve with a hard conversation. Others escalate into lockouts, missing funds, and threats of litigation.

For St. Louis business owners, knowing which kind of dispute you are facing affects what you should do next. This guide covers the most common causes of business partner disputes, the signs that a conflict is becoming serious, the options for resolving it, and the situations where legal help becomes necessary.

What Counts as a “Partner” Under Missouri Law

Many people who call themselves business partners are not partners in the legal sense. The rules that govern a dispute depend on how the business is organized:

• General partnerships are governed by Missouri’s Uniform Partnership Law in Chapter 358 of the Revised Statutes, along with any written partnership agreement. A partnership can exist without any paperwork if two or more people run a business together for profit.
• Limited liability companies are governed by the Missouri Limited Liability Company Act in Chapter 347 and the company’s operating agreement. Co-owners are “members,” and the operating agreement often controls how disputes are handled.
• Corporations are governed by Missouri’s General and Business Corporation Law in Chapter 351, the articles of incorporation, bylaws, and any shareholder agreement.

The structure affects nearly everything that follows, including what duties co-owners owe each other, what information each one can demand, and whether a court can order the business dissolved.

Common Causes of Business Partner Disputes

Most partner disputes trace back to a few recurring problems.

Money and Compensation

Disagreements over salaries, distributions, and reinvestment are among the most common sources of conflict. One partner may want to take profits out while another wants to grow the business. Tension also builds when one owner believes they contribute more work than the other but receive the same share.

Unequal Contributions

Partners often start with different roles, such as one contributing capital and the other contributing labor or expertise. Over time, those arrangements can feel unfair, especially if the original terms were never written down.

Control and Decision-Making

Disputes arise when one partner makes major decisions without consulting the other, such as signing a lease, taking on debt, or hiring key employees. In a 50/50 business, disagreement on a major decision can lead to deadlock, where the company cannot move forward at all.

Changing Personal Goals

A partner may want to retire, sell, bring in a family member, or shift focus to another venture. When the partnership agreement does not address an exit, these changes often become the start of a broader dispute.

Competing Business Activity

Conflict escalates quickly when one partner starts a competing company, diverts customers, or uses business resources for a side venture. This conduct can amount to a breach of fiduciary duty, discussed below.

Fiduciary Duties Between Business Partners

In Missouri, general partners owe each other fiduciary duties. Under RSMo § 358.210, every partner must account to the partnership for any benefit derived from partnership business or property without the consent of the other partners. In practice, this means partners must act with loyalty and good faith, avoid self-dealing, and not take business opportunities for themselves.

LLC members and corporate shareholders in closely held companies can owe similar duties, though an LLC’s operating agreement may expand, limit, or define them. Examples of conduct that may breach these duties include:

• Taking money from the business for personal use without authorization
• Diverting clients or contracts to a separate company
• Hiding financial information from co-owners
• Paying themselves or relatives above agreed compensation
• Making secret deals that benefit one owner at the company’s expense

Warning Signs the Dispute Is Becoming Serious

Not every argument calls for legal action. Some developments, however, suggest the relationship has moved past ordinary disagreement:

• You have been denied access to bank accounts, books, or company records
• Distributions or salary payments have stopped without explanation
• Money is missing or financial statements no longer add up
• A partner has changed passwords, locks, or signatory authority on accounts
• Customers, employees, or vendors report being contacted by your partner on behalf of a new business
• Your partner has stopped communicating except through email or a lawyer
• Major decisions are being made without your knowledge
• You have received a demand letter, a buyout offer with a deadline, or a notice of dissolution

Any one of these signs can mean your financial interest in the business is at risk. Several together usually mean it is time to talk with a lawyer, whether or not anyone has filed a lawsuit.

Options for Resolving Business Partnership Disputes

Not every partnership dispute ends up in court. The right approach depends on the agreement, the relationship, and what each owner wants from the outcome.

Review the Governing Documents

The partnership agreement, operating agreement, or shareholder agreement is the starting point. Many agreements include buy-sell provisions, valuation formulas, deadlock procedures, or mandatory mediation or arbitration clauses. Many disputes are based on how these provisions are interpreted.

Negotiation and Mediation

Direct negotiation, often with each side represented, resolves many disputes. Mediation brings in a neutral third party to help the owners reach an agreement. It is confidential, usually faster than litigation, and allows the owners to shape their own terms, such as a structured buyout or a revised division of responsibilities.

Buyouts

When the relationship cannot continue, one partner buying out the other is often the most practical outcome. The key issues are valuation, payment terms, releases of claims, and noncompetition or nonsolicitation terms. Accepting a buyout offer without understanding the business’s true value can mean accepting far less than your share is worth.

Arbitration

If the agreement requires arbitration, disputes are decided by a private arbitrator rather than a court. Arbitration can be faster and more private, but it limits appeal rights.

Litigation and Judicial Dissolution

When other options fail, owners can ask a court to resolve the dispute. Possible claims include breach of partnership agreement, breach of fiduciary duty, and requests for an accounting. In some cases, a court can order the business dissolved. For LLCs, RSMo § 347.143 allows judicial dissolution when it is not reasonably practicable to carry on the business in conformity with the operating agreement. For corporations, RSMo § 351.494 allows dissolution in certain cases involving deadlock, oppressive conduct, or waste of corporate assets.

When Legal Intervention Becomes Necessary

Talking with a lawyer early can help even when the goal is a quiet resolution. In some situations, waiting can cause harm, including:

• Assets are being moved or spent. A court can sometimes issue an order preventing a partner from transferring funds or property while the dispute is pending.
• You are being shut out. Missouri law gives partners, LLC members, and shareholders rights to access business records, and enforcing those rights may require formal action.
• A partner is competing with the business. Delays can allow customers, employees, and goodwill to move permanently.
• You have been asked to sign something. Buyout agreements, releases, and amendments to the operating agreement can waive claims you may not realize you have.
• A lawsuit or arbitration demand has been filed. Deadlines to respond are short, and early decisions affect the rest of the case.

Getting Help With a Business Ownership Dispute

Knowing your rights under Missouri law and under your governing documents puts you in a better position to protect your interest in the business. If you are facing a conflict with a co-owner and are unsure how to proceed, contact the business law team at Bruntrager & Billings, P.C. at (314) 646-0066 or online to discuss your situation.