While a written contract is easier to enforce, an agreement you made with one or more business partners to start a company and share profits and losses is enforceable, even if it was oral in nature. This means that you can hold a partner who violates the agreement accountable.
Perhaps you have a partner who has violated the terms of your partnership agreement by misappropriating company assets or by leaving the company in a way that represents a breach of contract. Depending on the nature of the breach, there may be several remedies available to you and any remaining partners. It depends partly on whether you wish to continue the relationship with the breaching partner or not.
1. Filing a lawsuit
If your partner breached the agreement in a way that caused damages to you and any other partners, you can file a lawsuit against the breaching partner. If a jury decides the lawsuit in your favor, the breaching partner is liable for compensating you for the damages you sustained, less the breaching partner’s stake in the company.
This is not an option if your partner just walks away from the business unless it was in violation of a clause in your partnership agreement describing when and how a partner could leave.
2. Seeking a settlement
You can seek to settle with the breaching partner outside of court. This may be your first step, or you can wait to file a lawsuit first and then negotiate the settlement. If you think you may want to salvage the professional relationship with the breaching partner, this is one of the few options that leaves that door open.
3. Expelling the breaching partner
According to Chron.com, if you have a partnership agreement that includes provisions for expelling a partner from the partnership, you may do so while preserving the relationship between you and the remaining partners. Otherwise, you cannot expel a partner without dissolving the entire partnership. However, this would not prevent you and the other partners from forming a new partnership.
If your partnership only consists of two people, expelling your partner from the company necessarily dissolves the agreement.