As with all human endeavors, disputes are likely to arise among business owners, partners or shareholders over how an enterprise is being run or should be run. For instance, issues concerning the compensation of owners and officers can occur as a company grows and increases its revenues and workforce. Anticipating areas where disputes can erupt and putting procedures in place for resolving them can make all difference in keeping a company healthy and productive.
Here are some common areas of dispute among business owners:
- Business expansion — One partner or shareholder may want to expand the business to take on new customers, increase the size of the workforce, take on debt to buy new machinery and increase the size of the factory. Another owner or shareholder may feel the time isn’t right to enlarge the workforce, thereby increasing costs or going into debt to fund expanded operations.
- Allocation of profits — After a profitable year, one owner may want to pay significant raises or bonuses to the partners and key employees. Another partner may want to take the year’s profits and invest them back into the business, such as for buying new equipment, paying down debt or making improvements to the physical plant.
- Breach of fiduciary duty — The worst-case scenario in a jointly held business is when one owner is accused of self-dealing or otherwise taking actions that are injurious to the enterprise. These may take the form of fraud against any of the co-owners, misappropriation of assets, failure to account for profits or pursuit of private transactions that rightly should be for the company’s benefit.
- Ownership changes — The resignation or death of partners or shareholders or the admission of new partners or shareholders can have a major impact on the business and the ownership structure. Sometimes a partner or shareholder decides to leave the company and wants the remaining owners to buy them out. Determining the fair market value of a partnership or ownership share can be a source of contention.
Businesses can benefit from well-drafted operating or partnership agreements detailing procedures that the principals of the business will follow should there be a dispute among the company’s leaders. Those procedures can include non-binding mediation and arbitration if the owners can’t reach an agreement on disputed issues. Resolving these disputes privately can prevent expensive litigation and harm to the business’s public reputation.
H. Clay Parker, Esq. represents Florida companies and their principals in all types of business ownership disputes. Please call 407-216-2504 or contact us online to schedule an appointment at our Orlando office. In cases related to civil or business litigation, we offer a $50 initial consultation.