Partnership Disputes
Protecting Your Stake When Business Owners Stop Seeing Eye to Eye
Partnership disputes can quickly disrupt both the business and the people behind it.
What may start as a disagreement over finances, management authority, compensation, or business direction often escalates into allegations of breach of fiduciary duty, self-dealing, misuse of company funds, or fraud.
At Resolvere Law, our Phoenix partnership dispute lawyers and business divorce attorneys represent business owners, partners, LLC members, and shareholders in high-stakes business conflicts throughout Arizona, whether through negotiation, mediation, or litigation when necessary. As business dissolution lawyers, we support clients in situations in which a business is to be dissolved.
As a Phoenix ownership dispute law firm, we have substantial experience handling protracted conflicts in Arizona. We understand how local business disputes unfold in practice, from procedural issues and emergency filings to the litigation preferences that can shape the direction of a case early on. That familiarity gives our clients meaningful strategic counsel when disputes become contentious.
We are available to represent clients in both state and federal courts, including disputes involving multi-state businesses and parties located across the country. Our Phoenix office is located at 3101 N. Central Avenue, Suite 850, Phoenix, Arizona, 85012, and we represent business owners in both Arizona state court and the U.S. District Court for the District of Arizona.
Partnership conflicts and LLC/shareholder disputes do not get easier by waiting. The longer an ownership conflict goes unaddressed, the more entrenched both sides typically become, and the harder it usually gets to reach a resolution that preserves the business’s value.
We invite business owners who are already in a dispute or who see one developing to call us at 480-702-2272 for a confidential consultation about their options.
We sometimes refer to disputes between Arizona business owners as “partnership disputes” through the common usage by owners often referring to themselves as being “business partners”, although the legal relationship may be one of partners, shareholders, or owners of interests in an LLC. As business ownership dispute attorneys, we represent clients across a wide range of business structures, including general partnerships, limited partnerships, limited liability partnerships, limited liability companies, closely held corporations, joint ventures, and other multi-owner businesses.
Similarly, some people search for help using different legal terms, such as a partnership dispute lawyer, business divorce attorney, business co-owner dispute lawyer, or LLC owner dispute attorney. The underlying issues, and the way we approach them, are the same, although the mechanisms and rights available to owners will vary depending upon the particular legal structure involved.
Whether you are a general partner, LLC member, shareholder, or business owner facing a dispute involving management authority, profit distributions, ownership rights, financial misconduct, breach of fiduciary duty allegations, intractable management issues, or even simply a desire to exit your current involvement in a business, we provide strategic representation designed to protect both your business interests and long-term objectives.
We offer consultations to understand your objectives, evaluate any existing dispute, review the governing documents, and discuss the practical and legal options available moving forward. Early involvement by experienced business litigation counsel can often make the difference between a manageable resolution and prolonged, expensive litigation. Please feel free to call us at 480-702-2272 to schedule a confidential consultation.
General partnerships, limited partnerships, limited liability partnerships, limited liability companies, closely held corporations, professional practices, and joint ventures are all common business entities in Arizona. We are available to represent owners in all of these matters in a wide range of matters, including:
Closely held businesses can experience significant problems when disagreements arise. Many disputes develop because expectations were never clearly documented, responsibilities became blurred over time, or the governing agreements failed to address what happens when business relationships deteriorate. When trust breaks down, disputes over control, profits, decision-making authority, ownership interests, and fiduciary obligations can escalate quickly into litigation.
A partnership or business ownership dispute covers any serious disagreement between the people who own a closely held business together, regardless of the entity’s legal form.
The entity type matters a great deal in a business ownership dispute. Partnerships and LLCs are largely creatures of contract, meaning the partnership agreement or operating agreement usually controls how profits are split, how decisions get made, how responsibilities get assigned, and how an owner can exit. Arizona corporations, however, are more statute-driven, with shareholder rights, voting procedures, and dissolution remedies set out in the Arizona Business Corporation Act.
When an ownership dispute arises, one of the first steps we will want to take is to identify the specific type of business entity that is involved, and obtain all relevant organizational documents, including partnership agreements, bylaws, operating agreements, buy-sell/shareholder agreements, and any other related agreements. Collectively, these documents and agreements and the corresponding Arizona law will set forth the framework under which a dispute will proceed.
From there, we evaluate the legal and practical issues and identify the claims and defenses available to the client. Then, we develop a strategy tailored to what the client actually wants out of the dispute, whether that is staying in the business, exiting on favorable terms, or protecting against a partner’s misconduct. Some matters are resolved with a demand letter and negotiation. Others require immediate legal action, such as a request for a temporary restraining order or preliminary injunction, to preserve assets, records, or the status quo while the dispute is resolved.
“Business divorce” is the term commonly used for the breakup of a business relationship between co-owners who can no longer, or no longer wish to, operate the company together.
Like a marital divorce, a business divorce usually requires untangling shared finances, shared property, and shared decision-making. It usually ends in one of three ways: one owner or group buys out the other’s interest, the business is sold to an outside party, or the business winds down and its assets are distributed among the owners.
Business owners searching for a “business divorce lawyer” or “business divorce attorney” are typically describing this exact situation rather than a personal marital divorce, though the two can overlap when a marital estate includes an interest in a business, a distinction discussed further below.
In some cases, a business divorce may be coupled with the divorce of one of the owners. This situation can be particularly contentious, especially if there is not a buy-sell, shareholder, or other agreement in place that addresses a divorce.
Arizona is a community property state, meaning that most assets owned by a couple are by default jointly owned unless there is an exception, such as a pre-nuptial agreement in which the couple agrees that one person will have sole ownership of business interests. This means that if a business owner is going through a divorce there may be further complicating issues.
We are experienced in representing clients who are involved in both significant business disputes with a co-owner and a personal divorce. If you are involved in this situation, we would invite you to call us at your earliest convenience to find out how we can help before the situation becomes even more complicated.
Hiring an experienced partnership dispute lawyer or ownership dispute attorney in the early stages of a conflict can make a substantial difference in the outcome. With years of legal practice, we are experienced in representing clients in difficult and complex matters involving financial claims, debt division, intellectual property ownership, deadlock, dissolution, and business failure, with a clear focus on protecting our clients’ business interests at every stage.
In the early stages of a conflict, there are often opportunities to resolve matters before owners get entrenched in positions and before significant legal fees are spent. Additionally, it is important to realize that the owners also have the freedom to craft creative solutions around their desired outcomes, which is often an appealing opportunity compared to taking adversarial positions.
In many instances, disputes do not arise as the result of conflict, but rather from a change in the interests and objectives of a business owner. An owner may wish to retire or simply no longer wish to be involved with the business.
We can help in these instances. Normally, the business owner wishing to leave the business will agree to be bought out by the remaining owner. In these cases, buyouts can be structured in accordance with whatever terms might be agreed upon. We are available to represent either the buyer or seller in these situations.
Financial disputes are one of the most frequent sources of partnership or ownership litigation. They typically involve allegations of improper accounting, hidden transactions, misuse of company funds, unequal or undocumented distributions, unauthorized withdrawals, or disputes over how much capital each owner actually contributed. Once issues arise in how the company’s finances are being handled, the working relationship between owners often deteriorates quickly, and a demand for financial records or an accounting is frequently the first formal step in the dispute.
Ownership disputes usually develop gradually rather than from one dramatic event. Common friction points in Arizona business disputes include:
Without a partnership agreement, operating agreement, or shareholder agreement that provides how these disagreements will get resolved, disputes can paralyze a company’s ability to function while the ownership conflict plays out.
We are available to represent an owner in these situations. We can advise on matters including ways to resolve disputes to keep the company intact to preserving an owner’s interests and objectives if a company breakup is desired.
Yes. Most partnership and business disputes are resolved before trial, often through negotiated settlements, mediation, or arbitration. Successful settlements usually occur when the evidence has been fully developed and both sides understand the financial and legal risks associated with continuing the litigation.
Buyout disputes are among the most difficult partnership conflicts because they directly affect ownership interests, company valuation, and future control of the business. Without a clear buy-sell agreement in place, disputes over valuation methods, payment terms, ownership percentages, and post-departure restrictions can become lengthy and expensive.
As Phoenix buyout lawyers, our firm handles partnership buyout negotiations, business valuation disputes, and litigation involving restrictive covenants such as non-compete and non-solicitation agreements.
Absolutely. In many cases, a negotiated buyout is the most practical and cost-effective solution. Structured buyout negotiations can help preserve business operations, protect customer relationships, avoid unnecessary disruption, and reduce the expense associated with prolonged litigation.
Often it is the case that what one partner really wants is to simply leave the business and obtain fair compensation for the value of their business share. That person may simply be tired of the business and want to move on to other ventures or even retirement, or it may be that a once promising venture turned out not to be as profitable as initially believed.
Our partnership buyout lawyers regularly assist clients with buyout negotiations, ownership separation agreements, valuation disputes, and dissolution planning.
Under Arizona’s Revised Uniform Partnership Act, partners owe each other fiduciary duties, including a duty of loyalty and a duty of care, as set out in the general standards of conduct and defined at A.R.S. § 29-1034; and must discharge these duties consistent with their obligations of food faith and fair dealing. LLC members and managers owe similar duties under the Arizona Limited Liability Company Act’s standards-of-conduct provision, defined at A.R.S. § 29-3409. In broad terms, these duties require a partner or member to account for company property and profits, avoid conflicts of interest, refrain from competing with the company, and disclose material conflicts to the other owners, while exercising reasonable care in how the business is run.
A breach of fiduciary duty claim may arise when a partner or member:
These claims are often central to partnership and shareholder litigation. A partner or member found to have breached a fiduciary duty may be liable for the resulting financial harm to the business or the other owners. Courts also have discretion to fashion equitable remedies beyond a straightforward damages award, particularly where the misconduct was ongoing or concealed.
Intellectual property contributed at business formation or developed during the course of the business relationship frequently becomes disputed, including trademarks, patents, customer lists, software, proprietary systems, and confidential business information. In many instances, there may be disagreements regarding whether the intellectual property is owned by the business or one (or even both) of the partners.
If ownership rights were not clearly addressed in the governing agreements, intellectual property disputes can become a significant part of litigation. In many cases, immediate legal action may be necessary to preserve evidence, protect trade secrets, or seek injunctive relief preventing misuse of company assets.
Minority shareholders in a closely held Arizona corporation have real, but limited, protections. Under A.R.S. § 10-1430, a shareholder can petition a court for dissolution or other equitable relief on several grounds. These include situations where those in control of the corporation “have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent.” They also include a board deadlock that threatens irreparable injury to the corporation, and corporate assets being wasted, misapplied, or diverted for noncorporate purposes. This is the statutory basis for what is commonly called a shareholder oppression claim.
Importantly, a shareholder oppression petition does not guarantee that the business itself will be dissolved. Under A.R.S. § 10-1434, the corporation has the option to elect to purchase the petitioning shareholder’s shares at fair value instead of allowing the dissolution proceeding to continue, with a court, rather than a jury, determining the price and terms if the parties cannot agree. In practice, this means a minority shareholder who files for dissolution should expect the likely outcome to be a court-supervised buyout rather than a wind-down of the company, and should plan litigation strategy accordingly.
Shareholder oppression generally describes conduct by a majority owner, or those in control of a corporation, that unfairly disadvantages a minority owner’s interest. Common examples include withholding financial information, refusing to declare distributions while paying majority owners excessive salaries, freezing a minority owner out of management, or diluting a minority owner’s ownership percentage without a legitimate business purpose.
Because minority shareholders in a closely held corporation typically cannot simply sell their shares on an open market, being frozen out of income and decision-making can leave a minority owner with an investment that is difficult to value and even harder to exit. Arizona law addresses this primarily through the judicial dissolution and equitable relief remedy described above, along with any protections built into the corporation’s bylaws or a shareholder agreement.
The Arizona Limited Liability Company Act uses the term “dissociation” rather than removal. A.R.S. § 29-3601 addresses a member’s power to dissociate, including the consequences of a wrongful dissociation, and A.R.S. § 29-3602 lists the events that cause dissociation, such as a member’s withdrawal, expulsion under the operating agreement, or certain events specific to that member.
Dissociation is not automatically the same as dissolution of the entire company. In many cases, a well-drafted operating agreement will specify a buyout formula that applies when a member dissociates, allowing the remaining members to continue the business while the departing member is paid for their interest. Where the operating agreement is silent or unclear on this point, disputes over whether a member can be removed, and on what financial terms, frequently end up in litigation.
Arizona law recognizes judicial dissolution of partnerships, LLCs, and corporations in defined circumstances. For general and limited partnerships, A.R.S. § 29-1071 sets out the events causing dissolution and winding up of the partnership business. For LLCs, A.R.S. § 29-3701 lists the events causing dissolution. These include dissolution by member consent, an event specified in the operating agreement, or the LLC going 180 consecutive days without any members.
A court can also order dissolution on grounds such as unlawful conduct, a management deadlock, illegal or fraudulent conduct by a manager, or a substantial breach of the operating agreement. The winding-up process is addressed separately at A.R.S. § 29-3702. For corporations, the judicial dissolution grounds are those described above at A.R.S. § 10-1430. All required filings for a formal dissolution are made with the Arizona Corporation Commission.
Persistent deadlock, financial misconduct, ongoing fiduciary breaches, or a company that is no longer reasonably capable of operating as intended can each support a request for dissolution. As the discussion of the corporate election-to-purchase mechanism above illustrates, though, a request for dissolution frequently results in a negotiated or court-ordered buyout rather than the business actually winding down.
A buy-sell agreement is a contract among a company’s owners, or between the owners and the company itself. It sets out in advance what happens to an owner’s interest when a triggering event occurs, such as death, disability, retirement, termination, divorce, or a dispute the owners agree should force a buyout.
A buy-sell agreement typically addresses three things that business owners fight over the most: who has the right or obligation to buy the departing owner’s interest, how that interest will be valued, and the payment terms. Those payment terms might be a lump sum, an installment note, or funding through life or disability insurance.
The presence or absence of a buy-sell agreement changes the entire strategy of an ownership dispute. When a clear, enforceable buy-sell agreement exists, a dispute over an owner’s exit is often reduced to applying an agreed formula, which can turn what would otherwise be months of contested valuation litigation into a comparatively straightforward accounting exercise.
Sometimes no buy-sell agreement exists, or the existing one is ambiguous, outdated, or was never signed by all owners. When that happens, the parties are left to negotiate or litigate both the right to a buyout and the price and terms at the same time. That is considerably more expensive and less predictable.
We are available to review existing buy-sell agreements for enforceability and fair treatment of all owners, draft new buy-sell provisions for businesses that do not yet have one, and litigate disputes over whether a triggering event has occurred and what a departing owner’s interest is actually worth. More detail on structuring these agreements is available on the firm’s buy-sell agreements page, and on how a well-drafted governing document more broadly can prevent ownership disputes on the firm’s operating agreements page.
Buyout disputes are among the most difficult ownership conflicts because they affect the departing owner’s financial future, the remaining owners’ control of the business, and the company’s cash flow all at once. Without a controlling buy-sell agreement, disputes commonly arise over which valuation method applies, whether a minority or lack-of-marketability discount should reduce the price, what the payment timeline should be, and whether the departing owner will be bound by post-departure restrictions such as a non-compete or non-solicitation clause. Our attorneys regularly negotiate buyout terms, draft ownership-separation agreements, and, when necessary, litigate valuation and buyout disputes through trial.
Business valuation in an ownership dispute typically relies on one or more recognized approaches: an income approach based on the company’s cash flow or earnings, a market approach comparing the company to similar businesses that have sold, or an asset approach based on the company’s net asset value.
The choice of method, and whether a minority-interest or marketability discount applies to a departing owner’s stake, is frequently the single most contested issue in a buyout or dissolution case. As part of our representation in a business valuation matter, we will normally engage a business valuation expert to thoroughly review the books and prospects of a company to determine an appropriate valuation. If a case goes to trial, the process and conclusions of the business valuation expert can be introduced as evidence to support the desired valuation.
Yes. In fact this is a common way in Arizona for resolving owner disputes.
Business mediation is a confidential, non-binding process in which a neutral third-party mediator helps the owners negotiate a resolution without a judge deciding the outcome. Mediation tends to work well in ownership disputes for a simple reason: unlike strangers in a car accident case, the parties usually have to keep dealing with each other. They may remain co-owners, become a buyer and seller of the departing owner’s interest, or simply keep running into each other in the same industry or community.
A mediated resolution can be reached faster and at lower cost than litigation, and it allows the parties to agree to creative solutions, such as a structured buyout paid over time, that a court could not necessarily order on its own.
No. Mediation is not the right tool for every dispute.
Where a partner has hidden assets, refuses to produce financial records, or is actively dissipating company funds, formal discovery tools and, in some cases, emergency injunctive relief may be necessary before a mediated resolution is realistic. Some ownership agreements also require arbitration rather than mediation or court litigation, which changes the procedural path significantly.
We evaluate early in the representation whether a case is a good candidate for mediation, and, when it is, prepare clients thoroughly for the mediation session itself. Additional detail on how mediation fits alongside other alternative dispute resolution options is available on the firm’s business mediation and alternative dispute resolution pages.
Yes.
Litigation becomes necessary when negotiation and mediation cannot resolve the dispute. It also becomes necessary when a partner’s conduct requires immediate court intervention to prevent further harm to the business, such as an emergency motion to freeze company accounts, preserve financial records, or stop a partner from unilaterally selling or encumbering company assets.
We represent clients in Maricopa County Superior Court, including its Commercial Court program, a specialized docket for complex business disputes that has operated on a permanent basis since January 1, 2019, as well as in the U.S. District Court for the District of Arizona when a case involves federal claims or the parties are from different states. Partnership and shareholder disputes of this kind are one part of our broader business litigation practice.
A founder who holds a minority stake, or who lacks voting control, can in some circumstances be outvoted, removed from management, or, in the corporate context, bought out through the election-to-purchase process described above.
Whether a specific attempt to remove a founder is lawful depends heavily on the governing documents and on whether those in control have acted within their authority or have crossed into a breach of fiduciary duty or, for a corporation, oppressive conduct. An owner who believes this is happening should gather the company’s governing documents and financial records and speak with an attorney promptly, since the available remedies, including emergency injunctive relief in some situations, can be time sensitive.
Yes.
Considerably. A clear, signed governing agreement is generally the single biggest factor in how quickly and predictably an ownership dispute is resolved.
Owners who never formalized their understanding, or whose agreement was drafted years ago and never updated as the business grew, are far more likely to end up in protracted, often expensive litigation. Owners who have a current partnership, operating, or shareholder agreement, particularly one that includes a buy-sell provision and a dispute-resolution clause, are far more likely to resolve a disagreement through a defined process rather than open-ended litigation.
A negotiated resolution or a mediated settlement is generally confidential and does not become part of any public record. A lawsuit filed in Maricopa County Superior Court or federal court, by contrast, generally becomes a public court record, although parties can sometimes seek protective orders for genuinely sensitive financial or trade-secret information produced during the case.
Business owners concerned about confidentiality are often, though not always, better served by pursuing negotiation or mediation before filing suit.
There is no fixed timeline. A dispute resolved through early negotiation or a single mediation session can sometimes be resolved in weeks. A contested dissolution or shareholder oppression case that proceeds through discovery, expert valuation, and trial can take a year or more, particularly in a complex matter involving disputed financial records or multiple business entities. The single biggest factor in how long a case takes is usually how quickly the parties can agree on, or a court can determine, the value of the disputed ownership interest.
In some circumstances, yes. A court can be asked for emergency injunctive relief in situations where a partner or member is actively misusing company funds, attempting to sell or encumber company assets, or otherwise taking unilateral action that threatens irreparable harm to the business. That relief can include a temporary restraining order or preliminary injunction to preserve the status quo while the underlying dispute is resolved.
This type of emergency relief is not available in every case. It generally requires a strong evidentiary showing that irreparable harm is likely to occur, which is one reason business owners are encouraged to consult an attorney as soon as a serious dispute develops rather than waiting.
Intellectual property contributed at formation, or developed during the life of the business, including trademarks, client lists, proprietary software, and confidential business information, frequently becomes contested when owners split up, particularly if ownership of that property was never clearly addressed in a governing agreement. Depending on the facts, these disputes may implicate the Arizona Uniform Trade Secrets Act, A.R.S. § 44-401 et seq. Immediate action, including a request for injunctive relief, may be necessary to prevent a departing owner from taking client relationships, proprietary systems, or confidential information to a competing venture.
Representation for most ownership disputes is handled on an hourly basis with each party paying for their own attorneys’ fees, though alternative or flat-fee arrangements may be available for limited-scope work such as a demand letter, an agreement review, or mediation preparation. We discuss fees, anticipated costs, strategy, and other matters with clients at the outset of the representation.
Yes. While based in Phoenix, we represent business owners throughout Arizona, including the Valley of the Sun (Scottsdale, Tempe, Mesa, Chandler, Glendale, and surrounding communities), Northern Arizona (Flagstaff, Prescott, and Sedona), and Southern Arizona (Tucson and surrounding communities), as well as in the U.S. District Court for the District of Arizona.
Ownershp disputes involve far more than a personal falling-out. These cases typically combine financial issues, fiduciary duty claims, valuation disputes, and, at times, urgent decisions that affect whether a business keeps operating. Mistakes made early in a dispute, including poorly handled communications, missed deadlines, an incomplete financial review, or an improperly drafted buyout agreement, can weaken a case and create unnecessary financial exposure that is difficult to undo later.
We handle high-stakes ownership disputes throughout Arizona and represent clients in negotiation, mediation, arbitration, and litigation. The firm’s stated approach is to pursue a negotiated resolution when doing so serves the client’s goals. At the same time, every case is prepared as though it may need to go the distance, so a client’s negotiating position never depends on an opponent’s assumption that the client will not litigate.
If you’re in an ownership dispute, we highly recommend learning about your options and seeking legal counsel as soon as possible. Please call us at 480-702-2272 for a confidential consultation.
★★★★★Mark handled what the other party should have handled. Fair in his process — not aggressive but not soft. Professional and genuinely effective. I always knew exactly where my case stood.
★★★★★Responded quickly and gave me focused attention. Takes the time to explain everything clearly. Exactly what you need from a litigation attorney — no surprises, just results.
★★★★★Would recommend Mark to anyone needing real estate guidance. Extremely knowledgeable — and a great ability to explain complex issues in plain language that actually helps you decide.
★★★★★From our first call, Mark laid out every option and what each would cost me. The case settled on terms I didn’t think were possible. Honest, sharp, and completely on my side.
★★★★★He never left me guessing. Every update was clear, every call returned. When the other side pushed, Mark pushed back harder — and we won.
★★★★★Professional, responsive, and genuinely invested in the outcome. Mark explained the construction claim process step by step and got us a result that exceeded expectations.
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