Welcome to Part 2 in a 12-part series entitled “12 Warning Signs You’re Headed for a Lawsuit with your Partner”.  If you missed Part 1, where I discussed what I believe is the #1 warning sign you’re headed for a lawsuit with your partner (indeed, it may also signal your last opportunity to avoid a lawsuit before your partner files a complaint!), click here to read that.
Ready for warning sign #2?

#2: Lack of Money–
When money gets tight, partners fight

It is not unusual to have one partner who has less financial resources than the other.  However, when partners come together with the expectation and/or  agreement that they will each contribute certain amounts of money up front and more later, if the situation warrants it, it is not uncommon for the financially weaker partner to come up short.  In fact, that is one of the most common disputes between partners.   So, if you are in a joint venture with one or more partners who are tapped out, that is a huge warning sign that you are headed for a serious discussion if and when the joint venture needs more money to stay in business.  What can you do?  

If your partnership agreement includes language addressing this issue, start by reviewing that language.  When we draft partnership agreements, we specifically include language that addresses this situation and provides detailed pre-agreed solutions to mitigate the risk of future disputes.  

Whether or not your partnership agreement includes such language, bring up the topic as soon as possible in a calm, business-like manner.  Discuss options to deal with “our problem”, including a possible re-adjustment of profit/loss interests. However you decide to resolve this issue, make sure you work with an experienced lawyer to document your agreement.

If you are entering a partner relationship of any kind, whether it is in an LLC, corporation, general or limited partnership, call us.  We can set it up to minimize the risk of future disputes.  If you are having challenges with a current partner, call us.  We may be able to help you resolve your dispute and avoid a lawsuit.  If litigation with your partner is inevitable, we can handle that as well.  For more information, call Jeff Lerman at 415-454-0455, x234 or e-mail him at [email protected]

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