For partners, shareholders and members of closely held businesses in New York and New Jersey there are a number of legal options and remedies available to you when faced with a “partnership dispute”. These legal remedies/options are a function of (a) the terms and provisions agreed to in your written partnership/shareholder/member agreement (if you have one) and (b) the “statutory” protections and rules that will be afforded to you under New York’s or New Jersey’s partnership and shareholder laws. One avenue of protection/rights when faced with a partnership/stockholder dispute, many times, business owners – and sometimes their legal counsel – act too quickly and without a full evaluation and assessment of the contractual and legal options that are available to you and how your contractual and statutory rights may be combined to offer you the best avenue for relief.
So when faced with a partnership dispute, some of the factors and information that you should be assessing and evaluations with your legal counsel should include:
- Shareholder/Partner/Member Agreements.For many apparent reasons, an honest assessment of your legal rights must start with an evaluation of your shareholder/”partnership” agreement. If you don’t have an agreement, it is important to understand that your situation is quite common (i.e. many “partners” never formalize a written agreement) and that you will nevertheless be afforded legal rights, remedies and options under the applicable “statutory” laws in New York and New Jersey.
- Relevant Writings. What are relevant writings? These are the written communications (letters, emails, and invoices) that document support or contradict the claims and rights that you will be asserting. For example, do you have emails discussing your partnership or how profits are divided? Do you have letters discussing salaries? Do you have “unsigned copies” of the partnership/shareholder agreement that you were negotiating? It is always better to be overinclusive when initially reviewing your legal options with your attorney. Documents that may seem inconsequential could have a positive impact on your case.
- Tax Returns. Federal tax returns (especially schedule K-1 for S corporations) are extremely informative and serve as an important analytical tool that should be initially reviewed with your attorney. Don’t be surprised if your tax returns contain errors or inaccurate information that you were unaware of – it happens often.
- Corporate Records. Your “corporate records” including your stock/member certificates, corporate by-laws and resolutions contain important information that should be initially assessed.
The foregoing documents (if they exist) should serve as a critical base of information that should be assessed and evaluated with your attorney. Once evaluated, you should discuss – in detail – the options available to you and the best course of action. Remember, if you think a document is important, it probably is.
