Believe it or not, this happens ALL. THE. TIME. It seems crazy, doesn’t it? That someone would start a business with a friend (usually, they are friends) and then… go MIA when things get a little rocky. YEP, it is crazy, and YEP, it happens! Communication breaks down, phone numbers get blocked. Your partner checks out and stops responding. Listen, there are always two sides to the story, usually I hear only one side…but it’s enough to say…sometimes people freak out, they get mad, they develop substance abuse problems, they fall in love and move away without telling anyone…and, if it is your business partner, well, it’s a big problem.
So, what do you do?
Look at the obligations imposed by law.
First, it’s helpful to discuss what obligations your partner owes you as your partner. Business partners have fiduciary duties that are simply written into Ohio law. Each partner owes fiduciary duties to the company and to each other. The fiduciary duties are the duty of care, duty or loyalty and duty of good faith. Without getting into specifics, this means as partners you must act with the best interests of the company in mind, above and beyond your own self-interest. So, if your partner is breaching their fiduciary duty by abandoning you, it might be necessary to sue. Especially, if their behavior is harmful to the business.
Look to your governing documents.
Goodness, if there ever was a time to have governing documents, such as an operating agreement or bylaws, to light the way…it is in this situation. Your operating agreement should say exactly what happens if fiduciary duties are breached. It should say what happens when a partner fails to participate in the day-to-day and fails to vote. It should say under what circumstances the business may be dissolved.
Unfortunately, it is not uncommon for people to have no governing documents.
Can you sue?
Just as there are procedures for forming a business, there are procedures for dissolving the business. If your partner just abandons the business, this will be a big problem for any remaining partner. What to do next depends on how the business was set up, and what the governing documents say. If you have an operating agreement, you probably have the right to take action to enforce your rights under the agreement. And, even without an agreement, Ohio law likely supports legal action if you can show you have been damaged by your ghosting partner’s behavior. In short, if the ghosting turns permanent, and you have no operating agreement that addresses this nightmare situation, and you will have to file a complaint in court asking the court to dissolve your business. Seems so drastic, right? I agree. But, that’s the way it goes. And, the process is called judicial dissolution. YUCK.
But, should you sue for damages?
Sigh…even though you can sue for damages, the better question is should you? Often, there may be no choice except to sue, as I just mentioned. But, sometimes, there are more cost-effective ways of resolving the issues caused by abandonment. If you are sustaining damages due to your partner’s abandonment of the business, then filing a lawsuit is one way to recover. But, sometimes just getting into court with the goal of dissolving the business (instead of seeking damages against your partner) is enough to allow you to move on to bigger and better things.
As always with litigation, you need the guidance of a lawyer to help you determine if suing is worth it. A lawyer will look at whether an agreement or operating agreement has been breached. A lawyer will examine the facts of your situation to determine whether fiduciary duties have been breached in ways significant enough to warrant suing.
Lastly, if this happens you, or if you are sensing a dispute brewing with your partner…come see me for the legal and for goodness sakes, come see me for some coaching on how to better treat yourself and your business. Remember, the way you are thinking creates how you feel, and how your feel drives your actions, which creates the results you see. So, in disputes with partners… it’s best not to take any actions from anger, frustration, overwhelm…easier said than done. I can help you.
Wick Law, LLC is a small business legal practice, representing owners, investors, and entrepreneurs in all aspects of commercial, corporate, and business law, estate planning, contracts and negotiations, business litigation, and real estate. For more information: Contact 614-572-6366, visit www.mwicklaw.com, or email us at email@example.com. Wick Law, LLC is located in Columbus, Ohio.
(Materials in this article have been prepared by Wick Law, LLC for general informational purposes only. This list is for educational purposes and is not to be considered exhaustive. More items could be added to this checklist based upon the type of transaction or industry standards. These materials do not, and are not intended to, constitute legal advice. The information provided is not privileged and does not create an attorney-client relationship with Wick Law, LLC or any of the firm’s lawyers. This checklist is not an offer to represent you. You should not act, or refrain from acting, based upon any information in this checklist. Wick Law, LLC maintains offices in Columbus, Ohio, and has lawyers licensed to practice in Ohio and in the United States District Court, Southern District of Ohio. The firm does not intend to practice law in any jurisdiction where the firm is not licensed.)
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