How to Handle 50/50 Partnership Disputes in Massachusetts

A partnership can be the best and worst of experiences, depending on how you and your partner get along. However, disagreements between partners can have legal and financial consequences. You can minimize those consequences by taking the right actions and seeking reliable legal advice. In this article, we walk you through the basics of how to handle disputes in a 50/50 partnership and how to develop a plan for dispute resolution in your business.

At Berluti McLaughlin & Kutchin LLP, our top-rated attorneys provide multi-disciplinary, full-service counsel to business owners in Massachusetts dealing with partnership disputes.

The Rights of 50/50 Partners

In a 50/50 partnership, the partners typically have equal rights and responsibilities. Under Massachusetts law, each partner has an equal say in business decisions and must receive an equal share of the business profits unless otherwise specified in a partnership agreement.

Also, all partners must consent to bring another partner into the business, and general partners are jointly liable for the business’s obligations. You can modify these basic rules by entering into a written partnership agreement.

Handling Disputes in a 50/50 Partnership

Resolving a partnership dispute may depend on how you set up your partnership. Although you do not need to file specific paperwork to form a partnership, you may want to write a formal partnership agreement to outline the terms of your partnership and make them clear to each partner.

Look at Your Partnership Agreement First If You Have One

In Massachusetts, partnership agreements can set the rules on how business partners will make decisions regarding:

Sharing profits,
Resolving conflicts,
Making capital contributions,
Reimbursing contributions,
Managing the partnership, and
Conducting partnership business.

So, if you disagree with your partner and are unsure of what to do, look at your partnership agreement first. However, if you want to make a decision against a provision in your partnership agreement, you first need the consent of all the partners.

You May Have to Negotiate If You Do Not Have an Existing Agreement

You typically need a majority vote to resolve a dispute if you have a general partnership but no partnership agreement. This means you need unanimous consent to make certain decisions if only two partners exist in your business.

When only two partners are at an impasse, one partner may negotiate to give something up in exchange for the solution they want. Terms of negotiation might include a partner making additional contributions to the business or giving up a fraction of their profit share.

If you agree with your partner to move past a dispute, you should put that agreement in writing. But if there is no room for negotiation, you and your partner might have to part ways, seek court action, or dissolve your business.

Consider a 50/50 Partnership Lawsuit

When communication and negotiation fail to fix a business issue, one partner may consider legal action against the other. In Massachusetts, an individual may have grounds for suing a business partner if one of the following occurs:

Failure to indemnify a partner for payments they made or liabilities they reasonably incurred to conduct or preserve the partnership’s business;
Failure to distribute a partner’s rightful share of the business profits;
Denial of a partner’s right to conduct or manage the business;
Failure to repay a partner for their contributions (and any associated interest);
Deciding on the partnership without the proper consent from the other partners;
Failure to provide a formal account of the partnership’s affairs;
Not complying with a term of the partnership agreement; or
A partner’s failure to pay their share of the partnership’s liabilities.

Suing a partner can have serious consequences for the business. Before proceeding to litigation, it is wise to consult an experienced attorney from BMK.

How to Terminate a 50/50 Business Partner Relationship

If a 50/50 partnership dispute becomes unresolvable, you and your partner might have to call it quits on your business relationship.

This can include buying out your partner’s share of the business by paying them for their contributions and giving them their share of the profits (after they pay their share of the liabilities).

You may be able to carry the business forward as a sole proprietorship after a buyout. If you choose this avenue, you, your partner, and any creditors involved should sign a written agreement regarding the buyout to protect each of you from future legal action.

You might also want to start fresh after a partnership dispute by dissolving the business altogether. Partners can dissolve a partnership either voluntarily, according to the terms of a partnership agreement, or through a court order.

Business owners can dissolve their partnership through a court order if one of the following applies:

One of the partners has engaged in conduct that negatively affects the carrying on of the business;
One of the partners can no longer perform their part of the partnership agreement;
One of the partners is of unsound mind or lacks the capacity to carry on;
One of the partners has breached their fiduciary duties, willfully or persistently breached the partnership agreement or has behaved in a way that makes carrying on the business with them not reasonably practicable;
The partnership can operate only at a loss; or
Dissolution is equitable because of other circumstances.

The court process allows a judge to impose a structured resolution when partners reach a stalemate. A court order can ensure that each party’s rights and obligations are honored under Massachusetts law. However, your best and first option in resolving a dispute is to talk to a skilled attorney about your issues.

BMK Can Get You Through Your Business Obstacles

Our knowledgeable business attorneys at BMK can show you how to handle disputes in a 50/50 partnership in Massachusetts. We have several decades of combined experience and are award-winning practitioners offering top-level representation to every client.

Our services are comprehensive and affordable. You can schedule an appointment with us immediately by calling or reaching out on our website.

Resource List

Mass. Gen. Laws, Title XV, Chapter 108A, §22, link
Mass. Gen. Laws, Title XV, Chapter 108A, §36, link
Mass. Gen. Laws, Title XV, Chapter 108A, §38, link
Mass. Gen. Laws, Title XV, Chapter 108A, §31, link
Mass. Gen. Laws, Title XV, Chapter 108A, §32, link