Member Disputes vs. Partnership Disputes
Member Disputes, although similar to partnership disputes, have a few important distinctions. Firstly, a member dispute occurs exclusively within the limited liability company structure, whereas a partnership dispute may occur in various business models. Another key distinction between the two types of disputes is that liability protection can be an incredibly intricate and sensitive topic for a member dispute. While LLC members should have their personal assets shielded from company debts, the line of separation can become quite unclear in the event of veil piercing. Veil piercing will occur when a member disrupts a boundary between company assets and personal assets, which can jeopardize the personal liability of one or more members.
Member disputes and partnership disputes share many of the same causes. Members may disagree over the direction and scope of their professional relationship. Members could also disagree over financial compensation or financial liability depending on the circumstances. Member disputes may also overlap with breach of contract disputes at times as some members may contest the terms or interpretation of a written agreement.
A member dispute can be resolved in numerous ways, some of which can be costly and others of which can be limited in their powers. Mediation, for instance, can be done in an inexpensive and flexible manner while providing private and confidential counsel. At the same time, mediation cannot hold any party legally accountable and will require voluntary acceptance from both parties. For clients that wish clarify the law, protect their rights, or seek punitive damages, mediation could be considered an inappropriate option.
Litigation on the other hand can provide the judicial structure that mediation lacks, but it will often also be a more costly choice. Arbitration can sometimes be thought of as a middle ground between mediation and litigation. Arbitration is, in fact, less expensive and more private than litigation, while still providing the legal basis that mediation lacks. Even so, arbitration offers limited resources and presents questionable objectivity as it seems that many arbitrators tend to rule in favor of company interests.
While all of these options have their benefits and drawbacks, it is ultimately important to seek legal counsel and receive individualized attention for your specific needs. Call 312.789.5676 to speak with one of our attorneys today and learn more about your member dispute.