What if I do not have an actual partnership or shareholder agreement?

If you are in a dispute with a partner or business associate, the law governing your dispute will depend on the kind of entity you have, such as a partnership, limited liability company, corporation or cooperative association. These laws provide certain basic “default rules” that will govern even if you have no other agreement in place. For example, the Colorado Limited Liability Company Act requires each LLC member to account to the LLC and to refrain from self-dealing and from certain conflicts of interest. It also requires members and managers to perform their obligations according to the doctrine of good faith and fair dealing. While LLC members can override many of these “default” rules by adopting an operating agreement, certain legal obligations cannot be changed, like the obligation of good faith and fair dealing.

We never had an agreement to form a partnership or association of any kind, we were just sharing profits. Why do I have a partnership claim?

The Colorado Uniform Partnership Act (UPA) provides that a partnership is formed when two or more persons or businesses associate to co-own a business for profit, regardless of whether or not the persons intend to form a partnership. C.R.S. § 7-64-202. If you are not acting as members of a limited liability company or corporate shareholders, the UPA will govern in the absence of a formal partnership agreement. Among other things, the UPA provides that partners hold fiduciary duties to one another. They must account to the partnership, must refrain from self-dealing, and must refrain from conflicts of interest. C.R.S. § 7-64-401.

Partnership, LLC and shareholder disputes can be very complicated, both legally and factually. Our attorneys have years of experience in analyzing these cases and helping clients determine their rights and obligations. Please feel free to contact us for a free consultation.