Business Partnership Dynamics
Look at partnership agreements and other company documents. These will spell out the ways that one business partner can push out another. A partnership agreement defines the relationship between you and your business partners. It should specify whether and when a partner can be expelled or bought out.
If you are concerned about a partner trying to push you out, contact an attorney. They can help you understand your rights under the law and terms of your partnership agreement. Or if forming a new partnership, they can help prepare an agreement that protects your interests.
Determining how to respond to a partner’s effort to push you out depends on the governing documents of your business. This is where an experienced business lawyer can help.
Business Partner Lock-Out Details
The mechanism your business partner uses could depend on the type of business entity. For example, general partnerships tend to be less formal than companies or corporations. Corporations and LLCs typically have governing documents addressing these situations.
In most cases, a partner can only force out another partner for violating the partnership agreement or laws. You may be forced out if a court decides the partnership should dissolve.
If your business partner successfully forces you out, you may be entitled to earnings and inspect the business’s books and records. To learn more, consult an attorney.
Possible Lock-Out Scenarios
Can a business partner lock me out? This comes up more often than it should. A partner takes control of a business and freezes out the other partner. The locks are changed. The credit cards are frozen, sometimes at very embarrassing times. Bank privileges are terminated. How is it possible to lock someone out of their own business?
Let’s answer the big question. Is it legal for a partner or partners to lock out another partner? That answer is “yes” under certain circumstances. If a partner has harmed the business through misconduct or flagrant mismanagement, a partner may take control and prevent the other partner from doing more damage.
Typically, a “lock out” operates as a dissociation of the excluded partner from the partnership. Depending on your case, the dissociation may be “wrongful” or permissible. Dissociation does not automatically lead to the winding up and dissolution of the partnership, but it does mean that the other partners intend to carry on the business without you.
Partnership Dispute Resolution
If you require assistance with a business or partnership dispute, get in touch with LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.
Or visit a bank branch with the person to be removed from the account. Is it legal for a partner or partners to lock out another partner? That answer is “yes” under certain circumstances. If a partner has harmed the business through misconduct or flagrant mismanagement, a partner may take control and prevent the other partner from doing more damage.