Business Partner Dispute in Florida: Options Before Suit

Business Partner Dispute in Florida: Your Options Before You File Suit

A business partner dispute in Florida usually starts with one document: the operating agreement for an LLC, or the partnership agreement for a general partnership. Read that document first. If it doesn’t address your problem, Florida statutes fill the gap.

This guide covers the common disputes between co-owners, the default rules that apply, and the steps owners usually weigh before anyone files suit. KEW Legal is a business law firm with offices in Coral Gables and Sunny Isles Beach. The firm acts as outside general counsel for business owners and investors across Miami-Dade and South Florida. This page is general information, not advice about your situation.

Start With the Operating or Partnership Agreement

The written agreement between the owners is the first document to pull, because it usually controls how the business runs. Under Fla. Stat. § 605.0105, the operating agreement governs relations among LLC members and between members and the company. For partnerships, Fla. Stat. § 620.8103 says the partnership agreement governs relations among partners.

Gather every version you can find. Look closely at these terms:

• Management and voting rules, including who can sign and what needs a vote
• Deadlock steps, if the agreement has any
• Transfer limits and buy-sell or withdrawal terms
• Notice and cure requirements, such as how a breach must be reported and fixed
• Dispute resolution or mediation clauses

Amendments, side letters, and signed consents can change the answer. A document signed years ago may have been replaced by one nobody remembers. Also check the company’s filed status. The Florida Division of Corporations, known as Sunbiz, publishes filing and status information for Florida business entities.

Florida Default Rules When the Agreement Is Silent

When the agreement says nothing about an issue, the statute decides it. Under Florida law, an LLC’s operating agreement governs relations among the members as members and between the members and the company, and to the extent the operating agreement does not otherwise provide for that matter, the statute governs it. Under Florida’s partnership law, relations among partners and between partners and a partnership are governed by the partnership agreement, and to the extent the partnership agreement does not otherwise provide, the act governs those relations.

These are general rules. They are not a substitute for reading your agreement. An agreement can change a default, and the statute limits some changes. How a court or mediator would apply a default depends on the facts and the documents. Two business owners with similar problems can end up with different answers.

In general, the default rules fill the gaps the owners left in their agreement. That is why the agreement comes first, and the default rules come second.

Deadlock in Decision-Making

A deadlock happens when owners split evenly and the vote needed to act cannot pass. Think of a 50/50 LLC that can’t agree on a lease renewal, a budget, a new hire, or a sale.

For member-managed LLCs, the statute requires a majority-in-interest vote to undertake an act. Under Fla. Stat. § 605.04073, that vote applies inside or outside the ordinary course of business, unless the statute provides otherwise. In an even split, neither side reaches a majority alone.

A deadlock clause in the agreement can set the steps, such as talks, escalation, or mediation. Whether a deadlock clause has any effect on when the company can be dissolved depends on the clause’s terms and on Florida law, so review the clause and the dissolution provisions together.

If there is no clause, the default voting rules control, and the result turns on the facts. Bring the agreement to your first conversation, along with a short timeline of the decisions that stalled.

Disputes Over Roles, Responsibilities and Management

Who can act for the company depends on how the company is managed. Under Fla. Stat. § 605.0407, an LLC is member-managed unless the operating agreement or articles say it is manager-managed. In a member-managed LLC, management is vested in the members. In a manager-managed LLC, the manager or managers decide matters.

Friction usually starts when one owner runs operations and another claims control. It also starts when one owner has gone quiet. Written roles help. Job descriptions, manager designations, and officer appointments show who has authority. Without them, each owner can read the same facts differently.

Pay for work is another trap. Under § 605.0407, a member of a member-managed LLC is not entitled to remuneration for services to the company, absent an agreement to the contrary, except that Florida law allows reasonable compensation for services rendered in winding up the company’s activities. Outside of winding up, the owner doing the daily work shouldn’t assume a salary unless an agreement provides for one.

Acting outside your authority is a real risk. A major decision made alone can invite a claim, even when the owner meant well. Record decisions in writing and in company records. Informal habits can create arguments, but start with the written terms.

Profit Distribution and Accounting Disputes

Most distribution fights come down to two things: the percentages in the agreement and the company’s books. Under Fla. Stat. § 605.04073, a member’s vote in a member-managed LLC is proportionate to that member’s percentage interest in profits. Distributions should follow the agreement, not just whoever asked first.

Start with the records. Compare the books with the agreement, bank statements, and tax filings before you draw conclusions. The statute gives members real tools. Under Fla. Stat. § 605.0410, a member of a member-managed LLC may inspect and copy required records during regular business hours, on reasonable notice. Within 10 days after a member’s demand for information, the company must give a written record. That record must say what it will provide, when and where, and why it will withhold anything.

Companies can set reasonable limits. Under § 605.0410, the company may impose reasonable restrictions on access to and use of information. In a dispute over reasonableness, the company has the burden of proving it. Whether a partner can inspect the partnership’s books and records, and on what terms, can depend on Florida law and on the partnership agreement. For general partnerships, under Fla. Stat. § 620.8403, the partnership may impose a reasonable charge, covering the costs of labor and material, for copies of documents it furnishes.

Avoid self-help. Moving money, changing bank access, or locking a partner out can create claims of your own. Review the rules before you act.

Breach of Fiduciary Duty and Financial Mismanagement

Owners owe each other duties of loyalty and care. Florida law defines both. Under Fla. Stat. § 605.04091, each member of a member-managed LLC owes fiduciary duties of loyalty and care to the company and its members. The duty of loyalty includes accounting for profit from company property or opportunities.

Partners have similar core duties. Under Fla. Stat. § 620.8404, a partner must account to the partnership for benefits from partnership business. That includes appropriating a partnership opportunity. The duty of care is limited to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

Conduct that often raises these claims includes:

• Self-dealing, such as a side deal with a vendor the company uses
• Taking a business opportunity that belonged to the company
• Running a competing business
• Mixing company funds with personal funds

The agreement has limits. Under Florida law, there are things an operating agreement may not do, such as vary a limited liability company’s capacity to sue and be sued in its own name, so the agreement’s terms are reviewed with those limits in mind. For partnerships, § 620.8103 bars an agreement from eliminating the duty of loyalty.

Before any suit, preserve documents and write a dated timeline. Check any notice requirements in the agreement. Whether conduct is a breach depends on the facts and the documents. No one can predict the outcome from a summary.

Breaking Up: Withdrawal, Removal and Buy-Sell Options

The main exit paths are a voluntary withdrawal, a removal the agreement allows, a negotiated buyout, a buy-sell clause, and dissolution. The right path depends on the documents and on how much the owners cooperate.

Under Fla. Stat. § 605.0601, a member can withdraw at any time, rightfully or wrongfully. A withdrawal is wrongful if it breaks an express term of the operating agreement. It is also wrongful if it happens before winding up is complete and falls within the statute’s listed events. A wrongfully dissociating member is liable to the company and the other members for damages.

Transfer limits matter too. Florida’s LLC statute has separate rules on transferring an interest in an LLC, and the articles or operating agreement may also restrict transfers. Read those terms before you plan an exit.

Buy-sell terms set the price and the payment schedule. Many disputes come down to how the agreement values the interest and when the buyer pays. A buyout can be harder than the exit itself. Tax treatment can also differ by entity type. The IRS business structures guidance explains the common business structures and how each is treated for federal tax purposes.

Employees, Customers and Unpaid Invoices

A departing partner who takes staff or customers often causes the sharpest fights. The question is what the agreement and the owner’s duties allow. Whether an LLC member may compete with the company can depend on the operating agreement and on the duties Florida law places on members. Partners have a similar duty under § 620.8404.

Keep three ideas apart: a non-compete, a non-solicitation promise, and the general duty of loyalty. They can overlap, but each comes from a different source. A signed covenant is a contract question. The duty of loyalty is a statutory question. This guide doesn’t set out the rules for covenants, so review the actual signed text.

Employee misconduct tied to a partner fight needs its own review. Examples include copying files or steering staff to a new business. Keep records of who did what and when.

Unpaid invoices are a separate thread. A client that won’t pay can turn a partner fight into a cash problem. Document the contract, the work performed, and each payment demand. Our related guides on customer poaching, employees who quit and take clients, and unpaid client invoices go deeper on those points.

Options to Try Before You File Suit

Before anyone files suit, owners can consider document review, written notice, and talks. These steps cost less and keep options open. Start by reviewing the agreement and assembling records. Check whether the agreement requires a specific notice format, then send notice that follows it.

Mediation is a structured step, and your agreement may require it. Florida courts also play a role. Under Fla. Stat. § 44.102, Florida courts can refer civil cases to mediation, so a business dispute that reaches litigation may still involve a mediated settlement discussion. For certain court-ordered mediations, § 44.102 conditions the referral on the requesting party being willing and able to pay the costs, or on the costs being equitably divided between the parties. That condition is not a general rule for every mediation. Section 44.102 also lists exceptions, including cases where the parties agreed to binding arbitration. Under § 44.102, written mediation communications, other than a signed settlement, are exempt from chapter 119 requirements.

A demand letter can clarify positions. A letter that overstates facts or arrives at a bad time can harden the other side and create problems of its own. Keep every statement accurate, and don’t threaten steps you won’t take.

Litigation is one option among several. Claims for an accounting, an injunction, or dissolution are possible in the right facts. The steps above can be weighed before anything is filed.

Personal Liability and Dissolution Under Chapters 605 and 620

In most cases, LLC members are not personally liable just for being members. Under Fla. Stat. § 605.0304, a debt or liability of an LLC is solely the company’s. A member or manager is not personally liable for it solely because of that role. Failing to observe formalities is not a ground for imposing that liability.

General partnerships work differently. Whether partners face personal exposure for partnership obligations can depend on the type of partnership and on the agreements involved. Joint and several liability means a creditor can pursue each partner for the full obligation. That is a serious risk.

Owners can still face personal exposure through a document they signed agreeing to be personally responsible for a business debt, or through their own conduct. Those questions depend on the documents, not on the entity type alone.

Dissolution follows statutory steps and the agreement. Florida’s LLC statute also addresses the management rights of a person who wrongfully causes dissolution, so check that rule against your facts and documents. When owners disagree, winding up can take longer than expected. Don’t assume the answer. Review the entity documents and the specific debts.

When Another Firm May Handle Your Matter

A matter may be handled by another lawyer or firm when a conflict of interest exists. For example, KEW Legal may already represent a party whose interests are adverse to yours. Before any representation is confirmed, the firm runs a conflicts check.

KEW Legal acts as outside general counsel for business owners and investors across Miami-Dade and South Florida. Its offices are in Coral Gables and Sunny Isles Beach. The scope of any engagement is set in a written agreement. Nothing on this page promises a particular result.

Frequently Asked Questions

Next Steps for Your Dispute

If a co-owner has stopped voting on a lease, or a former partner has taken customers, the agreement and records are the place to start. Send KEW Legal a message through the contact page or call 305-990-2300 to talk through your agreement and options before anything is filed.