Many Chicago residents do business with one or more partners. In many cases, the business partners will formally organize into a business association like a limited partnership or a limited liability partnership. Whether formally organized or not, partnerships share many characteristics, as partners will have legal and contractual obligations with each other.
While things are going smoothly, partnerships are a great way to draw on additional talent and resources for running a business.
However, like other relationships, sometimes business partners decide that they need to go their separate ways. These splits are not always amicable and may even lead to business litigation.
Dissolutions of partnership are usually handled through contracts
Most often, partners will have signed some sort of detailed agreement controlling how they will run their business together. When thoroughly thought out and drafted, this agreement will include detailed directions about what will happen should partners decide to part ways.
Should there be no such agreement, or if the agreement does not cover dissolutions, then Illinois law will determine how a court will dissolve a partnership and wind up the affairs of the business.
When a business partner wants out, the first step is read over the agreement carefully. Many agreements will spell exactly what the partner is entitled to as part of a buyout, and the agreement may even list possible penalties, interest and the like.
The partner should be able to enforce a valid agreement but may need the assistance of an experienced attorney.
Partners have fiduciary obligations to each other
It is also important for businesses to remember that the law usually imposes fiduciary obligations on them.
This means that when it comes to the affairs of the partnership, each partner has to act in the best interest of the partnership.
This fiduciary duty precludes a partner form, for example, competing with the partnership or from diverting partnership funds to one’s private use or interests.
Sometimes, either before or during a dissolution of a partnership, it becomes clear that a partner has met these obligations. They can be held liable for a separate claim of breach of fiduciary duty in these circumstances.