What to Do When My Business Partner Pushed Me Out
A business partnership often begins with shared goals, energy, and a vision for growing a successful enterprise. But what happens when things go wrong, and your partner takes steps to push you out of the business you helped build?
Unfortunately, this situation is more common than most entrepreneurs realize, and it can leave you feeling helpless, betrayed, or uncertain about your next steps. From understanding whether your partner acted within their legal bounds to filing claims for breach of fiduciary duty or contract, seeking legal guidance is the next logical step.
If your partner has pushed you out of your business, The Parzivand Law Firm, PLLC, can help. With a unique background combining legal knowledge and human resources experience, the firm recognizes how business disputes can quickly escalate and take a personal toll and offers approachable, cost-effective solutions to clients throughout Texas, including Stafford, Sugar Land, and Fort Bend County.
Understanding Your Rights as a Business Partner
Being pushed out of a business you co-founded can leave many business owners uncertain about how much control they have or what their legal rights are. However, your legal rights will be represented in the terms of your partnership agreement, if you have one in place.
This agreement should specify ownership percentages, responsibilities, profit-sharing arrangements, and processes to address disputes or dissolution. If your partner violated any terms of this agreement, this could be grounds for legal action.
Even without a formal written partnership agreement, Texas law offers certain protections under the Texas Business Organizations Code. For instance, Texas law recognizes the fiduciary duties between partners. This means that each partner is obligated to act in good faith and in the best interests of the business. If your partner acted out of self-interest or deliberately tried to undermine you, you may be able to pursue legal action.
Understand the Laws Governing Business Partnerships in Texas
Texas follows the Texas Business Organizations Code (BOC), which governs partnerships, corporations, and other business structures in the state. Some of the key laws and principles that are relevant to one partner being pushed out of a business partnership include:
Fiduciary duty: Partners legally owe certain duties to each other, such as the duty of loyalty and the duty of care. Breaching fiduciary duties could involve embezzling funds, hiding important business decisions, or trying to exclude a partner from profits.
Partnership agreements: While a written partnership agreement is not legally required in Texas, it is highly recommended. Without one, the default provisions of the BOC take precedence. For example, profits and losses may be divided equally regardless of ownership percentage in the absence of an agreement. If you entered into a verbal or informal agreement, Texas courts might still uphold it under partnership laws if there's evidence of the agreement.
Wrongful dissolution and freeze-outs: It is illegal for one partner to wrongfully dissolve a partnership or engage in a "freeze-out" (a tactic of pushing out a partner by excluding them from decisions, roles, and distributions). Texas courts review whether the partner’s actions were within the legal powers afforded by the partnership or shareholder agreements.
Texas Uniform Partnership Act: The Act covers some of the default rules for partnerships in Texas, particularly when disputes arise in the absence of agreements. Your ability to recover damages or regain an ownership stake often depends on the specifics of your case.
Document and Evaluate the Situation
If you suspect your business partner is pushing you out, gather all relevant evidence before making any moves. Documents like financial records, emails, meeting minutes, and written agreements will support your case. Some key red flags you should look out for include:
Being excluded from meetings or decisions
Sudden changes in the allocation of business profits
Lack of communication about key operations
Restricted access to banking or company documents
If any of these tactics have occurred, it's important to document them to build a strong legal argument. Reach out to an experienced business litigation attorney who can help you determine the best course of action.
Pursue Negotiation or Mediation
Before escalating the matter to litigation, consider whether the dispute could be resolved through negotiation or mediation. For some partners, airing grievances and clarifying misunderstandings may clear the way for an amicable resolution.
Mediation is often less time-consuming and costly compared to a legal battle, and it allows both parties to have some degree of control over the outcome. However, it’s important to approach negotiations with a clear understanding of your rights so you don’t inadvertently forfeit your ownership interest or other entitlements.
Build Your Defense with the Right Business Attorney
If you’re unable to reach an agreement or if your partner has engaged in illegal or unethical behavior, the next logical step is to consult a business attorney who is experienced in handling disputes. An attorney will help you evaluate whether your partner's actions breach fiduciary duties, contractual terms, or laws under the BOC. Some common legal pathways may include:
Suing for breach of contract if your rights or responsibilities as specified in the partnership agreement were violated.
Filing a suit for breach of fiduciary duty if your partner acted in self-interest, prioritizing personal gain over the business or partnership.
Seeking damages for financial losses caused by the partner’s misconduct.
Exploring dissolution options, where the business would be legally dissolved and assets fairly divided.
An attorney will evaluate your case to determine whether court filing or arbitration is the most appropriate course of action.
Business Law Attorney Serving Stafford, Texas
Being pushed out of a business you helped create can be stressful and overwhelming. But you don't have to go through it alone. The Parzivand Law Firm, PLLC, values forming meaningful connections with its Texas clients to help them resolve business partnership challenges.
With an approachable demeanor and deep understanding of legal and human resources issues, the firm offers practical, customized solutions to meet your needs. Contact The Parzivand Law Firm, PLLC, to schedule a consultation for breach of contract and business disputes. Located in Stafford and Houston, Texas, the firm serves clients in Sugar Land and Fort Bend County.