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What to do when your business partner starts a competing business

| May 9, 2018 | Firm News |

A healthy business partnership is built on trust. A business can flourish when business partners trust and act in good faith toward each other.

A competitive spirit is generally a good quality in a business partner. But what happens when one partner takes that competition too far? What options are available when a business partner leaves to create a competing business?

The best strategy is to take steps to prevent the issue. Many partnership agreements contain a non-compete clause, where partners agree to not start a competing business or directly compete with one another. A partnership agreement can be customized to include this language. This can be an effective way to prevent a problem from arising. However, non-compete clauses must meet certain requirements to be enforceable, therefore, it is valuable to have an attorney review the clause.

What if the new business was created after the partnership dissolved?

Depending on the specifics of the case and what language is used in the partnership agreement, you may be able to sue the partner for breach of fiduciary duty. In this situation, an attorney can provide invaluable advice on how to proceed.

Partners may be able to work together toward a mutually beneficial resolution through negotiation or mediation. However, it may necessary to proceed to trial to ensure your business interests are protected.

This is a complex area of law. The stakes are high financially and professionally. It is advisable to involve an attorney at the earliest possible stage, preferably one with significant litigation experience.

If you are involved in a situation where a former business partner has started a competing business, schedule a time to meet with a business attorney from Chenoweth Law Group, P.C. Call 503.446.6261.