Where the path is usually set
The partnership agreement is the starting point, and many agreements already prescribe a sequence, such as negotiation, mediation, and then arbitration, along with buyout and valuation formulas. When the agreement is silent or incomplete, state partnership law fills the gaps, and its default rules can produce results neither partner wanted, including dissolution of the firm. Because partners generally owe one another loyalty and good faith, an accusation that someone diverted business or funds tends to push the dispute toward litigation. An accounting, meaning a court-supervised review of the partnership's finances, is a traditional remedy in partnership cases. The same concerns apply, with different statutes, to limited partnerships, limited liability partnerships, and LLCs that operate like partnerships.
Steps to protect the business and your position
Secure your access to the books, bank accounts, and key systems, and make copies of the agreement and amendments. Keep records of contributions, draws, and capital account balances, since disputes over who put in what are common. Client relationships and staff need attention, because both may leave if the conflict becomes public. Avoid unilateral moves such as emptying accounts, changing passwords to lock a partner out, or soliciting clients for a new firm, which can create claims against you. Communications with your partner during this period may later be read by a judge or arbitrator, so keep them measured.
Choosing among the options
In a first meeting, we identify what the agreement requires, what each partner actually wants, and how much the business can bear in time and expense. Mediation often works when partners mainly disagree on price or roles, and a neutral valuation can narrow that gap. Arbitration may be mandatory and can be faster and more private than court. Litigation becomes more likely when there are allegations of diverted money or when one partner needs a court order quickly to protect assets. We then map out the likely sequence and costs so you can decide with a clear picture.
