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What to Do When Your Business Partner Threatens to Sue

When you went in on a new business venture with your best friend, you knew that it would, without fail, be a massive success. With the two of you at the reins, you foresaw your startup making a profit before its first full-year in business. A lofty assumption, many told you at the time.

But you were right; the startup performed the way you had envisioned. There’s even an interested buyer, or so you learn from your business partner. They want to sell the startup, but you want to continue running it, maybe you could blow it up to be something even bigger. Not seeing eye to eye, you and your best friend, your business partner, can hardly stand being in the same room together now. The animosity is affecting the staff and your work. Then one day, it happens: your business partner threatens to slap you with a lawsuit. What is their reason for taking you to court? You’re hurting the company, and they want you out.





Without a professional liability insurance plan, you’ll be paying for attorney fees and other additional court costs. When your business is threatened, small business insurance will cover the financial burden.

When you’re threatened with a lawsuit by a business partner, here’s how to take care of yourself.

Have a heart-to-heart with your business partner. Ask your business partner for a meeting together to discuss what you both want for the company and to see if you can come to a compromise. If you have a hard time getting your points across to each other, enlist the help of a small business counselor. A small business counselor can help you better communicate your ideas to each other and remember what motivated you to co-found the business together.

Retain all messages of correspondence and agreements. If an agreement has been put in writing, it can be used in the court of law, this applies to both you and your business partner. If you or your business partner agreed to sell the company two years or more after its start date and the disagreement (as mentioned above) was about selling the company, this could make or break the lawsuit. Make sure you have all letters and messages of correspondence so that nothing is taken out of context.

Read the fine print. What was written into the partnership contract that gives your business partner the right to sue? Unless you specifically breached the partnership agreement, the Small Business Chronicle writes that your partner does not have legal grounds to sue you. Nor can your business partner expel you from the company if the agreement does not specifically address expulsion.

Offer to buy them out. If your business partner is in it for the money, offer to buy out their half of the company, with interest. They will most likely turn this option down, especially if selling the company as a whole would be more profitable, but it’s still worth a try.

Hopefully, having an open discussion with your business partner will keep you out of the courtroom, but if doesn’t, professional liability insurance is there to help. Get your free quote today with CoverHound.

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