What the law says
Co-owners of a business owe each other duties, and their agreement sets the rules. Partners owe the duties of loyalty and care in Corporations Code section 16404, which means accounting to the partnership for any benefit taken from its business, avoiding conflicts, and not competing with it. Members and managers of a California limited liability company owe similar duties under the Revised Uniform Limited Liability Company Act, and directors and controlling shareholders of a corporation owe fiduciary duties to the company and, in the right circumstances, to minority owners.
The agreement matters as much as the statute. Partnership agreements, operating agreements, shareholder agreements, and buy-sell agreements control how money is distributed, how decisions are made, how an owner exits, and how the business is valued when they do. Many disputes are decided by what those documents say, and many arise because the documents were never finished.
When the agreement is broken, the remedies are contract damages, an accounting, removal of a manager, a buyout, or dissolution of the business. Written contract claims must be brought within four years under Code of Civil Procedure section 337, oral agreements within two years under section 339, and fraud within three years of discovery under section 338.
What you can do
Get the documents: the operating or partnership agreement and every amendment, the financial statements, the tax returns, and the bank records you have access to. As an owner you are generally entitled to inspect the books, and a written demand to inspect them is often the first move.
Write down the timeline. When did the distributions stop, when did the other owner start running things alone, what did they say when you asked? Emails and texts between owners are usually the most important evidence in these cases.
Then decide what you actually want: your share of the money, control of the business, a clean exit at a fair price, or the business wound up. The claim is built around that answer. It may be a lawsuit for breach of the agreement and breach of fiduciary duty, a petition for an accounting, a demand for a buyout under the agreement, or a petition for judicial dissolution.
How fast you need to move
Four years on a written agreement and two on an oral one, with fraud claims running three years from discovery. Those are the outside limits. The practical limits are shorter: a business that is being run into the ground, or stripped of its customers and assets, loses value every month, and injunctions and receiverships are easier to get before the damage is done than after.
How we handle these cases in Santa Clara County
We read the agreement first, because it usually decides the first move. Then we get the financials and trace where the money went. Legion, the AI litigation platform our founder co-founded, lets us go through years of bank and accounting records quickly, which in a co-owner dispute is where the case is.
Business disputes are filed in the civil division of the superior court, in Santa Clara County or wherever the business and the agreement point. When the situation is urgent, we ask the court for interim relief: an order preserving assets, a receiver, or an injunction against a partner competing with the business.
Most co-owner disputes end in a buyout or a negotiated dissolution. We prepare them for trial so that the buyout happens at the right number.
Common situations
- A partner is running the business and has stopped paying the others. Demand the books, then an accounting. Withholding distributions without a basis in the agreement is a breach.
- A co-owner started a competing company with the same customers. That is a breach of the duty of loyalty, and the profits of the new company may belong to the old one.
- Family members inherited a business and cannot agree on what to do with it. This is where trust and estate work and business litigation meet. The trust may control the shares, and the operating agreement may control the company.
- There was never a written agreement. California's default partnership and LLC rules fill the gap, and they are often not what either side expected.
Am I too late?
How long do I have?
General information, not legal advice. Confirm your dates with a lawyer.
Questions people ask about business & partnership disputes
Do you still handle business disputes?
Yes. Trust and estate litigation is the focus of the firm, but partnership, LLC, and contract disputes between co-owners use the same skills, and many of our estate cases involve a family business.
My partner is running the business without me. What can I do?
Demand the books, then decide between a buyout, an accounting and damages claim, or dissolution. The operating or partnership agreement usually controls the first move.
How long do these cases take?
A few months when the agreement is clear and the numbers are available; a year or more when a business valuation is contested. Most settle before trial.
This page is general information, not legal advice, and reading it does not make you a client of Rothrock Legal. No attorney-client relationship exists until an engagement letter is signed. Deadlines depend on your facts and change; confirm yours with a lawyer.