What Can I Do If My Business Partner Decides to Start a Competing Business?

When it comes to building healthy business partnerships, trust is a key ingredient. It’s only when partners fully trust one another and act in good faith that a business can truly thrive and reach it’s potential. One of the key ingredients to making it as a business owner is having a competitive spirit. But sometimes this can cause problems in a partnership where partners are perhaps not seeing eye to eye and haven’t established the kind of trust their business needs require for success.

What do you do when you find yourself in a situation where the trust has gone, and your partner’s competitive spirit is leading them to not just leave your partnership, but build a business to directly compete against you? As is the case in many things, an ounce of prevention helps more in such situations than a pound of cure.  And usually, it is cheaper.

How to Help Prevent A Partner Building a Competing Business

The good news is that if you are just now entering into a partnership, there are some key things you can do to help prevent this type of thing from getting off the ground in the first place:

  1. Include an enforceable non-compete clause in your partnership agreement. This one is pretty simple, make it clear at the outset that you and your partner will not directly compete with one another. Non-compete provisions in a contract often encounter arguments regarding enforceability. Getting the language right can help, so you will want to consult with your business attorney.
  2. Consider alternatives to litigation as a way to resolve conflict. Litigation should be the last straw in a dispute resolution because it’s public, it’s costly, it’s time-consuming, and the chances of the businesses involved surviving plummet the longer the process drags on. Not to mention the economic and emotional impact on the business itself and its employees and partners. An alternative to litigation, such a collaborative business divorce can offer a far quicker, less costly, and less messy solution that you will want to at least consider before pursuing litigation.
  3. Breaches of your partnership agreement. If there was a breach of your partnership agreement during its existence and a partner has misappropriated your opportunities for himself in a competing environment, there is a chance that you may be able to claim that certain assets of the competing company actually belong to the existing business. Consultation with an experienced business attorney will help you assess your options in your business divorce.

In Conclusion

If you have questions about partnership agreements, non-compete clauses, and what to do if your partner is threatening to leave to start a new business, we are here to help. With an experienced business attorney, clients can help protect themselves and their businesses through often trying circumstances. If you want to know more or have an urgent legal need, call Stephen Rizzieri at 214.434.1017 or fill out the form on our law firm site today.

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