Articles Posted in CORPORATE AND PARTNERSHIP LITIGATION & DISPUTES

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In my many years as an experiencedAtlanta business attorney, I have witnessed countless business persons begin business partnerships with the best of intentions, only to find themselves in drawn out litigation or disputes. In a high profile partnership dispute case, the Atlanta Journal-Constitution reports that the Atlanta Spirit co-owner Steve Belkin has until Thursday, February 25th to pay $2 million or lose his stake in the partnership. The eight-person partnership has been fighting in court since 2005 to determine how much seven of the group must pay Belkin to buy out his 30% interest.

Belkin is part of a partnership bought the Hawks, Thrashers and Phillips Arena operating rights from Turner Broadcasting System in 2004 and shared voting power equally among three subsets of owners. Like many failed business partnerships, the group almost immediately began having disagreements and losing money.

Our Georgia business dispute lawyers see partnership disputes arise all the time, between partners, shareholders and family members. This is true for all kinds of business and over a wide variety of business matters. Moreover, the poor economy has caused more and more businesses to lose money. As such, business partners are blaming each other for the company’s failure and fighting over the company’s assets and future. As a result, many partnerships all across Georgia and the nation are floundering.

If your Georgia based business is suffering from internal disputes, disagreements and financial losses, you need an experienced business lawyer in Atlanta to be on your side and help you determine several issues such as:


• Do you want to sell your company?

• Do you want to retain control over the business?

• Do you want to operate the business yourself?

• Do you want to retain your personnel?

It is crucial you have an experienced Georgia business attorney with you to determine what your options are in the case of a break up. Typical solutions include settlement, buy-out, sale or distribution of the business, and arbitration.

If your partnership or business is failing or if you are in the midst of a partnership dispute, please contact the Atlanta Business Law firm, The Libby Law Firm to help you undertake to protect your business interests.
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As an Atlanta Lawyer I have many clients that come to me to help them set up their businesses. Business entity formation, partnership and operating agreements, employment contracts and agreements, and employment law are all areas that I frequently work on for my clients. There are other times, though, when I do represent my business clients in court. In fact, according to a 1997 ruling by the Georgia Supreme Court, any Georgia business that is facing litigation must hire a licensed attorney to represent the company. Thus, if you do not have a business attorney and become involved in litigation, you must retain one. What is more, many of my Atlanta, Business Law Clients who work with our Atlanta Attorneys out of our Atlanta or Marietta Offices, often comment on how glad they are to have us nearby for piece of mind, prosperity, profitability, but most of all, that they know we are there for them when something inevitably and/ suddenly arises. I have engaged in dialogue with many of my clients, on more on a few occasions, to find out what makes having a good Local Atlanta, Georgia Business Attorney essentially, on call (or on staff). Virtually all of the answers I received were statements about how a prudent businessperson cannot just go out and find a business lawyer their business can work with and trust at the last minute . . . like a Starbucks.

It is always prudent to have Atlanta Attorneys on hand who is familiar with the company and can step in if litigation arises. But, there are other very good reasons to hire a business lawyer. The first is to properly set up the business. Deciding on which type of business entity will work for the business model is important before filing the proper paperwork. A knowledgeable Georgia Business Attorney is invaluable at this stage in business formation. Personal liability issues and tax consequences need to be considered and an experienced Atlanta, Georgia business lawyer will have good insight into which options are best for the business. An hour could be all that is required to complete an initial assessment of this step, but doing it right can help you avoid future financial and legal issues and serious tax problems or lost tax benefits.

Before hiring employees at the new company, it is essential to draft solid Georgia employment contracts. Job duties, payment terms, non-disclosure agreements and non-competition clauses all need to be considered. These documents will ensure that future litigation is kept to a minimum. This is especially true given the most recent proposed changed to The Georgia Constitution wherein Judges will be allowed to “blue pencil” in changes to employer-employee agreements to make them enforceable so long as they are no less favorable to the employee. (This subject matter is a whole new set of Articles/Blogs which will be coming soon. The fact is, the fallout from this legislation has yet to be seen).

An Atlanta, Georgia business attorney and Atlanta, Georgia employment attorney can also help with the hiring and firing or the process of “laying off” employees and can assist with setting up a system to measure employee performance. The guidelines and contracts that are established early on will help protect the company if any employee ever files a lawsuit against the company. Besides paying employees, many companies purchase services from suppliers, have leases on property (for example, vehicles and commercial real estate) and sign distribution or licensing agreements. A business attorney will safeguard your company against one-sided agreements by negotiating favorable terms for the company.
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In my Atlanta, Georgia Business Law firm, I have seen many instances of business owners that have suffered because of how their businesses were initially set up. When establishing a new business, or even when re-establishing an existing business entity, it is imperative to have legal counsel review the specific needs and circumstances of the business and draft the legal documents required by Georgia law. With a clear understanding of the structure and dynamics of the organization, a Georgia business attorney is able to determine the proper Georgia legal entity that the business should operate under and will file the appropriate documents with the Georgia Secretary of State to establish the entity. Per Georgia law, legal contracts and agreements will then be drafted that outline the relationships between business partners, and licensing and taxation issues will be reviewed. Addressing these matters up front is greatly beneficial in preventing or resolving any partnership disputes or litigation in Georgia courts.

In today’s tough economy, many people are starting their own businesses. But with the infiltration of online legal document services, it is easy for new business owners who may be strapped for cash to bypass using the services of a Georgia business attorney. Unfortunately, by their very nature, these online legal documents can cover only the most common legal issues and cannot begin to address the individual circumstances and requirements that ultimately face any business. These “e-documents” do not address specific Georgia business requirements and provisions. Relying solely on documents found through an online service may seem cost effective and quick at first glance, but the results can be disastrous. These documents are not legal advice and are not a substitute for an experienced Georgia business lawyer. A reading of the disclaimer from any of these “e-document” sites confirms that the provider of these “e-documents” has set forth these “e-documents” for information purposes only. Further, as you might guess, these “e-document” providers take no responsibility for the serious problems these “e-documents” cause or assist you when pressing concerns arise. As an Atlanta, Georgia business attorney, I have seen the countless problems these “e-documents” create. As a proprietor of a well-established Georgia business law firm, I find the sale of these documents untenable.
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Yes, partnership nightmares are common. . . How common? Read on . . .

I have noticed many individuals are stepping away from their employment with large companies to start their own Georgia businesses. Some feel that the current economic situation has provided a golden opportunity that should be seized and others are forced to move on after being downsized by their companies. Often, these businesses are Georgia partnerships formed with friend, family and/or former work colleagues. Unfortunately, a great percentage of people begin these Georgia partnerships without the proper legal guidance or documentation based on Georgia’s partnership laws. Unwittingly, these would be business partners believe that long time personal relationships between partners, their own personal business knowledge, or other such reasons, will sufficiently protect their Georgia business partnership from internal strife, power struggles, and/or economic failure.

The fact is, even under ideal circumstances, Georgia partnerships are complex and should not be left unchecked. While partnership agreements do keep the “honest people honest,” they also stop abuse by others with less than honorable intentions. As an Atlanta Business Partnership Lawyer, I have handled many cases where even the best intentions between business partners could not stop Georgia partnership litigation from arising. In cases when the business entity does survive, the resulting chaos usually proves to be costly and detrimental to the business.

Thus, preventing Georgia partnership disputes is paramount. This involves retaining an experienced Georgia partnership attorney at the beginning of the partnership to construct a fair and manageable business relationship between partners. The next best thing to beginning a business relationship, in which a Georgia partnership lawyer skillfully guides you, is to catch a Georgia business partnership dispute before it gets serious in order to protect your interests. Usually, the first partner who realizes this and seeks legal guidance has the upper hand in the outcome of any Georgia partnership dispute, litigation, or dissolution.

Georgia partnership disputes can surface between and among anyone with an interest or influence on the company, including Georgia partnership shareholders and family members. Once disputes do arise, business partners are inclined to blame one another for any business failures. Common issues to address when a business is failing include whether or not to sell the company, employee retention, and company management. An experienced Georgia Business Partnership Attorney can help sort out these issues and provide the most beneficial solution to all involved.

The Georgia business partnership attorneys at The Libby Law Firm can assist you in determining and implementing solutions to resolve disagreements between partners, protect Georgia partnership interests, or effectuate partnership dissolutions. While litigation is the most common way Georgia partnership disputes are resolved, mediation or arbitration are also wise dispute resolution options. Other alternatives include buy-outs, settlements and distribution or sale of the business entity.
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Atlanta Business lawyers at The Libby Law Firm know that a Georgia corporation must be represented by an attorney in order for it to file a claim or to defend itself in a suit brought against it. This might seem like a heavy burden for a business––after all, an individual can represent him- or herself in court––so why must a corporation obtain representation instead of, say, being represented by the sole shareholder in court?

Although an individual can represent him- or herself in court––which is called “appearing pro se”––Georgia law prohibits a non-attorney from representing someone else in court. Corporations are considered to be and treated like an individual under law; therefore, permitting the shareholder to represent the corporation would be allowing the unauthorized practice of law because a non-attorney (the shareholder) would be representing another (the corporation) in court.

In fact, the Supreme Court of Georgia has held that:

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As a well-known Atlanta, Georgia Partnership Lawyer, I handle many cases involving Georgia business partnership conflicts. One of the most common scenarios is for one partner to be saddled with running the business entity single-handedly. This single-handed effort by one partner is usually in stark contrast to the terms and intent any partnership operating agreement, which governs the duties and responsibilities of the partners. This is an extremely destructive situation for the partner who is trying to maintain the business. As this partner attempts to shoulder all the responsibility for the business; including business debts, liabilities, day-to-day business problems, the financial position of all the business partners suffer. In due course, all partners in the business are on the path to failure.

Surprisingly, many business owners do attempt to struggle alone through this type of situation due to a personal sense of responsibility and unwillingness to admit that a problem exists. But this is not the recommended course of action. An Atlanta, Georgia Partnership Dispute Attorney should always be consulted with when a business partnership is suffering due to one or more partner’s inability to carry out the fiduciary duties and responsibilities implicit in most partnerships. The decision to work with a Georgia partnership attorney to resolve partnership disputes and disharmony could very well save your business, your financial situation, and possibly business and familial relationships.

It is unwise to allow a business partner to walk away from legitimate responsibilities, especially when this can both damage the partnership business and the remaining partners’ credit and future prosperity. Remember, under Georgia Partnership Law, you do have legal recourse.

At The Libby Law Firm, our team of experienced Atlanta, Georgia Partnership Dispute Attorneys are equipped to resolve almost any partnership issues which may arise in the course of a partnership. Our Atlanta, Georgia business lawyers routinely help business owners set up partnership agreements and later enforce the terms of these agreements if necessary, in order to ensure that all partners are fulfilling their obligations.

Our Atlanta, Georgia partnership litigation attorneys will work with you to equalize your partnership duties and responsibilities. Whatever your circumstances are regarding a partnership that is failing or is poised to turn into a bona fide partnership litigation lawsuit, our Firm is ready to help you get your business back on the road to success. Call our office today to discuss your situation at (404) 467-8611.
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As a Corporate Attorney in Atlanta who advises sole proprietorships, partnerships, and corporations, it is important to remember that each entity is more than just a name on paper that you take on to take advantage of various tax benefits.

Even if you have a simple family-owned business formed as a C Corp, that is no more than you and your spouse as the sole directors and shareholders, it is still important to observe basic required corporate formalities if you want to maintain the protection from personal liability that such a corporation provides.

If you fail to observe these basic formalities, you could risk your C Corp being disregarded by a court in an action called “Piercing the Corporate Veil” where the court holds that you indeed do not have a proper corporation and therefore can be held personally liable for any and all debts.
So, to avoid this and maintain the corporation you have established, what do you have to do?

Annual Meetings. Shareholders and directors must generally meet at least once a year to approve and authorize new business, elect new directors and officers, etc. Of course if this is just you and your spouse, partner, friend, etc., this can be as simple as sitting down or discussing over the phone the business of the company. The key to formalizing this step is keeping records of the meeting known as Minutes.

Minutes. Be sure to keep timely and accurate minutes of all shareholder and director meetings. In other words, write down what actions were discussed, agreed to, and taken, when, by whom, and where. The proper form for Minutes can be obtained from a licensed Georgia Business Attorney.

Consent Forms. Forms for “Actions by Unanimous Written Consent” can also be obtained from your business attorney to formalize and record decisions made at these meetings.

REMEMBER: THERE IS NO SUBSTITUTE FOR FOLLOWING GEORGIA CORPORATE FORMALITIES

At The Libby Law Firm we advise C Corps, Subchapter S Corps, LLCs, and many other types of corporations and business entities on following corporate formalities. Our Atlanta Business Lawyers know the importance of following corporate formalities and how this can prevent you from being personally liable for corporate debts, judgments, and other liabilities of your corporation.
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As an Atlanta, Georgia Corporate Attorney, advising CEOs, CFOs, Secretary, Directors, Officers, Shareholders, it is critical you avoid mingling your personal affairs with any business matters, and vice versa. Many new business owners seek to protect themselves from personal liability by setting up corporations, the most popular being Limited Liability Company (or LLC). Regardless, a corporation can only protect you from personal liability stemming from your corporations liability, to the extent, you take care to separate your role in the corporation from your role as an individual.

Generally, the fist step in protecting yourself from debts and liabilities incurred by your corporation is incorporating your corporation (or business). In Georgia, filing the appropriate documents with the Georgia Secretary of State and creating a Limited Liability Company (or LLC) or a Corporation, can provide protection from personal liability. However, taking this action will not give you absolute protection from liability. Additional steps in your behavior, statements, and actions are critical in protecting yourself from being personally liable for debts of the corporation. When you are held liable for debts of the corporation because the company and your personal affairs are to tightly interwoven, is called Piercing the Corporate Veil.

Piercing the Corporate Veil occurs when opposing counsel (or another party) can show that the CEOs, CFOs, Secretary, Directors, Officers, Shareholders, etc. are mingling corporate their affairs with their individual affairs. Doing this is a huge mistake and you should avoid it at all cost no matter what inconvenience it may cause you or what your personal view of the Georgia law on Piercing the Corporate Veil encompasses.

Under what circumstances can I be personally liable for debts of the LLC, or corporation? And, why should I take additional steps for protection?


As a Corporate Lawyer in Atlanta, Georgia, I know from seeing Piercing the Corporate Veil legal proceedings first-hand that taking additional precautions can prevent creditors from going after your personal assets – such as your money or your home – in the event your business incurs debts that it is unable to pay. These debts can include car loans, bank loans, lease obligations, and money owed to lawyers, accountants, etc., for services rendered to the business.

These extra precautions can also prevent plaintiffs from collecting money from your personal accounts and assets to satisfy a judgment against you. A Georgia business could incur this type of liability in a variety of ways, including:


• A personal injury or accident in your office––coffee burn, slip and fall, etc.


• A product or service that injures a client, either physically or financially


• A car accident that occurs when an employee is making a delivery or driving to meet a client in the scope of work.

• Mismanagement of a client’s money


So what are some extra precautions you must take take?


• Georgia law requires corporate entities to file for renewal every year. This is a quick, relatively low-cost ($50.00 annual fee) process that keeps your corporation or LLC active. If you do not renew your business, the Georgia Secretary of State will administratively dissolve your corporation and, therefore, your protection from personal liability.


• Keep your corporate and personal bank accounts separate. Do not use your business account to pay for personal expenses – taking your family out to dinner with business funds, buying presents for your in-laws with corporate monies, paying for a weekend getaway “on the corporations’ tab”, etc.


• Do not personally guarantee any loans or financial arrangements for the corporation if you can avoid doing so. Acting as a personal guarantor opens the door to personal liability, as creditors can look to you to pay the business’s debts.

• Make sure that all of your contracts entered into using your corporate position and then your name in this capacity (i.e. as President, etc.) Do not use your individual name, even if you are the sole shareholder. For Example:

___________________________ Signed, Larry J. Doe, President ABC Enterprises of Atlanta, LLC

• Maintain the proper insurance for your business and make sure that the corporation’s name is listed as the “name insured” on the insurance policy. Your Atlanta, Georgia, Corporate Insurance Attorney should be able to help you with this process. Additionally, keep written records of discussions and of how the insurance agents, lawyers, CPAs, advised you to ensure your business is safe or you want to compare it to another opinion at a different time. A personal umbrella policy might also provide additional personal protection for business owners.


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As an Atlanta Partnership Dispute Attorney, I realize that a partnership is created anytime two or more people go into business together. Our Top Atlanta Business Partnership Lawyers typically refer to “partnerships” as specific legal entities called general partnerships or limited partnerships. However, for simplicity in this discussion we will refer to any group of people who are in business whether shareholders in a closely held corporation or members of an LLC as “partners.”

REDUCE YOUR PARTNERSHIP TO WRITING!

My first and foremost advice as an Atlanta Business Partnership Lawyer, is to reduce your Georgia Partnership Relationship to writing. The worst thing partners can do is establish a business or enter into some form of joint venture without a clear agreement. This agreement should be reduced to writing to avoid any ambiguities or misunderstandings about these responsibilities. With or without a written partnership agreement, disputes will occur. If the dispute cannot be resolved between the partners, each partner needs effective legal representation. Atlanta, Georgia, Litigation or Negotiation, Mediation or Arbitration (Collectively referred to as Alternative Dispute Resolution – ADR) may become necessary. While Georgia Partnership Litigation is never a pleasant option, the consequences of not enforcing your rights may be far worse. AThe Libby Law Firm Atlanta-Based Business Attorneys are exceptional ADR masters and may possibly carry the day and protect your best interests without see in the inside of a courtroom

QUESTIONS YOU SHOULD ASK YOURSELF
Are you the minority shareholder in a closely held corporation? Are you being prevented from viewing the company’s financial documents, which precludes you from knowing whether you are receiving your proper share of business profits? Is the majority shareholder paying himself an exorbitant salary (or flying on a private jet)? Not taking action to protect your legal rights and interests can cost you lots of money over the years.

MORE QUESTIONS YOU SHOULD ASK YOURSELF
Are you the majority shareholder? Have you exercised your fiduciary duties to your partners in responsible and reasonable manner? Can you avoid a lawsuit from your partners for breach of your fiduciary duty?

TAKE ACTION IMMEDIATELY!

Other Atlanta, Georgia Partnership Disputes may arise when one partner takes an opportunity for herself, which, should have been presented to the business, over competing business by one partner or over business funding. Whether you are an individual, family, business, or other type of clientele, please take the opportunity to let us assist you. Without action, your problems will almost surely get worse and you will find yourself in at the point of no return.

Should you ever find yourself in a position where you or your partners have a dispute, you should immediately seek legal advice to protect your interests. We will work to resolve disputes informally and inexpensively, but when litigation or ADR is necessary, The Libby Law Firm will be glad to be your zealous advocate for your position to obtain you the best possible result. An initial consultation on these matters is available without cost or obligation. The Libby Law Firm Attorneys are Smart, Resourceful, and Aggressive and may be your saving action. However, you need to act by Contacting Us immediately.
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The focus of this Blog Article will be Self-Dealing and Breach of Fiduciary Duties in this scenario. However, it is important to note that that Self-Dealing is just one way a breach of fiduciary duty can occur.

There are numerous situations where breach of fiduciary duties can arise. There are also many types of fiduciary duties, which can arise. Some of the most commonly breached fiduciary duties are as follows:

• Self Dealing


• Misappropriation of Funds


• Neglect of Fiduciary Duty


• Usurping Business Opportunities for Personal Gain


• Abuse of Power


• Shareholder Oppression


• Shareholder Squeeze Out


• Shareholder Freeze Out


• Conversion of Funds


• Failure to Act When Fiduciary Duty Imposes Such A Requirement

There are also a number of relationships that give rise to fiduciary duties. Some are as follows:

• Directors and Officers in Corporations


• Partners in Business


• Real Estate Brokers


• Real Estate Agents


• Stockholders/Shareholders


• Financial Advisors


• Financial Brokers


• Executors of Estates


• Trustees of Trusts


• Administrators of Estates


• Personal Representatives of Estates


• Guardianships of Wards


• Conservatorshops of Wards


• Powers of Attorney


• Health Care Situations

These different types of breaches of fiduciary duties will be addressed throughout this Atlanta Business Lawyer Blog over the course of time. However, for the purpose of this Blog Article, we will concentrate on one of the most frequently breached fiduciary duties, the classic case of “Self Dealing“.

Self-dealing is often occurs between officers and directors of Georgia corporations have a fiduciary duty of care and loyalty to the shareholders of those organizations. As such, under Georgia law they are obligated to act in good faith and in the corporation’s best interests. When officers or directors put their own personal interests above those of the corporation and shareholders (i.e. by using corporate assets for their own benefit), this is considered self-dealing. Issues such as self-dealing are a growing issue and occurrence in corporations. The Atlanta Fiduciary Law Attorneys in my Atlanta, Georgia Business Firm have represented numerous clients who have made with claims concerning self-dealing against the “higher-ups” and/or other “shareholders” in the corporation.

When this type of allegation is brought forward, the plaintiff must provide proof that the officer or director derived personal benefit from the transaction. If this is shown, then the officer or director must defend their actions by demonstrating that the transaction was for the benefit of the Georgia Corporation, and any perceived self-dealing was just happenstance and circumstantial. Even when the director or officer does prove that the action was favorable to the corporation, and ultimately the shareholders, it still may be considered a breach of fiduciary duty.

Self-dealing and other breaches of fiduciary duty can financially destroy a corporation. Thus, it is essential to have an operating agreement that clearly defines the obligations of all members and interested parties to a corporation. An experienced Atlanta, Georgia Fiduciary Law Attorney can put a stop to the self-dealing and adequately assist in imposing remedies in equity and at law upon the self-dealing party. Nevertheless, to dispense with arguments that self-dealing did or did not occur; it is wise to have an Georgia operating agreement that defines the responsibilities among members of the company, both for shareholders, directors and officers, and employees. A comprehensive operating agreement should be part of the beginning and day to day operation of any corporation.
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