Legal challenges are virtually inevitable when you are running a business.
How Do Business Entity Disputes Occur?
When conflicts arise within the company, business entity disputes can occur. Typically involving disagreements between owners, partners, shareholders, or board members, these disputes can stem from various issues, including the following:
- Ownership conflicts: Disputes can develop over ownership percentages or when one or more owners feel their rights are being violated or ignored.
- Disagreements concerning management or control: In limited liability companies (LLCs), partnerships, and corporations, disputes can arise over how the business should be run, who controls critical aspects of the company, and who has the final say in management decisions.
- Financial disputes: Disagreements about financial mismanagement, misappropriation of funds, and how profits are distributed are common sources of conflict in business entities.
- Breach of business agreements: Operating agreements, partnership agreements, and shareholder agreements outline the framework within which the business will operate. Violations of these agreements can lead to disputes that threaten the company’s stability.
- Breach of fiduciary duty: Directors, managing members, and other fiduciaries have a duty to act in the best interests of the company. If one party believes another party has failed to fulfill those obligations, it can lead to internal conflict.
- Exit strategy conflicts: Disputes can arise when one or more owners want to exit or dissolve the business while others want to continue operating.
