Dunn Lambert, LLC

Financial infidelity between business partners

2026-09-24T17:19:52Z

Financial infidelity is something that is often talked about in the context of marriage. It generally just means that couples are not honest with each other about their finances. A person’s spouse may lie to them about spending, debt, or income levels, for example. But this can also happen in a business context. For instance, business partners may be dishonest with one another about how they are using company funds. This can cause the trust between the two to break down, the same way that it would in a marital relationship. Honesty and trust are fundamental both to marriages and business partnerships, so when this breaks down, it often leads to the end of the relationship.

Breaching their fiduciary duty

When it comes to business relationships, a big problem is that financial issues could cause one person to breach the fiduciary duty that they owe to their business partner and to the company that the two own together. If that person has misappropriated funds and lied to cover it up, that is going to cause significant conflict if the truth comes to light. But even when funds are used for business purposes, conflicts could occur. One business partner may feel that the other is frivolously wasting limited funds on extravagant expenditures, like business trips. They may believe that the spending needs to be much more closely monitored. In fact, these conflicting values could be the reason that the two are not communicating well about finances or why one business partner would even lie about their use of business funds. They just see things differently and may not be compatible.

Navigating a business divorce

When financial infidelity and other types of conflicts arise, business partners often go their separate ways. As partners go through a business divorce, it is crucial that they know what legal steps to take to protect their interests.

When a vendor abruptly increases their prices

2026-09-17T03:11:19Z

Working with specific vendors can help organizations keep their costs predictable. A long-term vendor contract can protect a client organization from unpredictable costs or an inability to source key goods or materials. They can potentially rely on regular deliveries from the vendor. When there is a clear vendor contract in place, business leaders may take for granted that they have locked in pricing that works for the company. However, vendors may announce the intent to change their pricing with little warning. What rights do clients have when a vendor suddenly changes their prices?

Vendors must uphold contracts

There are many reasons why vendors may want to adjust what they charge for goods and materials. Perhaps they face price increases in their supply chain that leave them unable to maintain prior pricing because it results in a loss. Maybe inflation in general has led to higher operating costs, forcing them to rework the budget and assess revenue streams. Regardless of the reasoning behind the adjustment, the vendor should honor the contract. Failing to do so can constitute a breach of contract. The agreement may require a certain amount of advance notice before pricing increases take effect. The client organization may also have the option of canceling the contract outright rather than agreeing to the pricing change. If vendors simply increase their prices without communication or otherwise fail to uphold the terms of a written agreement, then the businesses affected by those decisions could potentially take legal action. A lawsuit could result in contract rescission or even an award of damages. Reviewing communications and contracts with a business litigation attorney is often the best option for companies facing a sudden surge in prices. Legal guidance can prove helpful during negotiations and if litigation becomes necessary.

2 reasons business partners should have complementary skills

2026-08-28T16:05:40Z

When someone is looking for a business partner, there is often a natural inclination to look for someone who is similar to themselves. It is easier for them to get along; they see things the same way, they are more likely to have similar goals and their visions for the business will align. To some degree, these factors can be important. Business partners do need to get along, and shared goals can be helpful. But when it comes to the skills and traits that each person brings to that business, it is often best for them to be a bit different. These skills should be complementary, rather than overlapping.

A lower chance of disputes

One benefit of having different skill sets is that partners are less likely to get into conflicts and disputes. They will naturally control different areas of the business and make different types of decisions. When two people are extremely similar, it can actually lead to a higher level of conflict. Two people who each want to make the same creative decisions or financial decisions, for example, could find themselves at odds so often that it leads to a business divorce.

Making the business stronger

Additionally, complementary skills strengthen the business as an entity. If one person is better at creative decisions or design decisions, for example, while the other is better with the financial details, they work together to give the entire business proficiency in multiple areas. On the other hand, when both people are similar, they may be lacking skills in other areas that can hold the business back. If this leads to a lack of long-term success, it can also eventually lead to a business divorce, as the partners decide to go their separate ways. Finding the right business partner is important, but nothing guarantees that the partnership will last forever. When partners decide to dissolve their business relationship, it is important for them to know what legal steps to take.

3 steps to handle partner debt in business divorce

2026-08-28T14:43:24Z

When business partners separate, dividing shared debt creates tension. Unpaid company debt can leave you personally responsible for balances long after you leave the business. Taking clear legal steps to divide debt protects your personal bank account.

Conduct a complete audit of all business liabilities

Before dividing financial debts, you must list everything the company owes. Collect every financial record tied to the business, including:

· Credit card balances and open lines of credit

· Unpaid bills from vendors and suppliers

· Leases for equipment or office space

· Unresolved lawsuits or back taxes

Gathering these financial documents identifies known debts. In New Jersey, closing companies can also issue official public notices to lenders. This sets a strict deadline that cuts off future claims from unknown creditors.

Assign liability responsibilities in a formal separation agreement

Once you know what the company owes, write down who will pay each bill. Your separation contract needs clear rules covering:

· Promises to repay you if your ex-partner fails to pay an assigned debt

· Specific dates when shared balances must be paid in full

· Responsibilities for taxes tied to canceled debt

A promise to repay gives you the right to sue your former partner if they break the agreement. However, it does not stop lenders from coming after you if your name remains on the account.

Refinance joint debts to release personal guarantees

Banks do not follow your private separation agreement. If your name stays on a bank account or loan, the lender can demand payment from you directly.

To eliminate your personal risk, you can refinance the debt under your partner's name, obtain a formal written release from the bank or sell company assets to pay off the balance in full. Partners in general partnerships may also be freed from debt if a lender changes loan terms without consent after learning of the separation.

Protect your personal finances during a business separation

Sorting out business debt requires careful legal planning. Speaking with a qualified business litigation attorney helps you build a strong settlement that settles old debts and keeps your personal money safe.

Disputes arising from ambiguity in business contracts

2026-08-17T18:09:05Z

Many business divorces stem from contract disputes. Cases of co-owners, partners or shareholders ending a business relationship because of contract-related issues are common. Disagreements typically involve day-to-day operations, profit distribution, compensation, company funds, intellectual property and deadlock. Various factors can lead to contract disputes – one of which is ambiguity.

Conflicting interpretations of rights and obligations

Vague words in a business contract can result in conflicting interpretations of each party’s rights and obligations. For example:

A partnership agreement that does not clearly define the day-to-day roles of each partner can lead to important work being undone or the same job being done twice, resulting in wasted time and resources.
An agreement that states a partner gets a share of “net profit” without specifying what counts as expenses can lead to disagreements. One partner may believe the other is making high corporate deductions and, in turn, lowering their share.
A shareholder agreement with unclear voting thresholds, such as one that uses terms like “substantial majority” instead of a clear numeric definition, increases the chances of severe corporate deadlocks.
Vague buyout formulas are also risky. When remaining members want to buy a departing partner’s share but the agreement states “fair market value” without a defined appraisal method, that can leave room for different approaches that yield wildly different figures.
Conflicting clauses can also cause disputes. For example, when the profit clause of a partnership agreement says profits will be split by ownership percentage but the compensation clause gives a working partner a high guaranteed salary first, resulting in low shareable profits for the rest.

Vague contract language opens the door for everybody to interpret clauses the way they prefer, and that often leads to litigation. Learn more about contract disputes and how to solve them to protect your business.

When mediation or arbitration makes sense for a “business divorce”

2026-08-01T14:03:26Z

When business partners face insurmountable differences, it may be necessary to end their relationship via a “business divorce.” This process often involves complex financial issues, operational disagreements and strained relationships. Many owners want a process that protects their shared company while reducing disruption. Mediation and arbitration can offer structured ways to resolve disputes without the uncertainty of a courtroom. Before you decide how to move forward with your own business divorce situation, it is important to understand these two potential options, as one may work better for your unique circumstances.

Mediation helps to support productive discussions

The mediation process can allow disputing owners to work with a neutral facilitator who guides structured conversations. This encourages open dialogue and helps participants identify practical solutions. Many prefer mediation because it preserves privacy and reduces conflict. It also allows parties to maintain control over the final outcome rather than relying on a judicial ruling.

The role of arbitration in business divorce

Arbitration provides a more formal process that resembles a streamlined hearing. A neutral decision maker reviews evidence and issues a binding decision. This option is often used when owners need a concrete resolution quickly or when an operating agreement requires arbitration. Many businesses choose arbitration because it limits public exposure and offers a relatively predictable timeline.

Factors to consider before choosing a process

Selecting the right dispute resolution method for a particular situation requires careful evaluation. Owners should consider the complexity of the issues under scrutiny, the level of cooperation between participants and the need for confidentiality. Each factor can influence whether mediation or arbitration will be likely to inspire a workable outcome. Seeking experienced legal guidance can help you evaluate risks, interpret contractual requirements and select the dispute resolution method that is most likely to protect your business and your rights effectively.

Warning signs of an impending shareholder dispute in New Jersey

2026-07-27T13:23:16Z

Shareholder disputes rarely happen without warning. In closely held New Jersey corporations, tension often grows slowly. It can build through daily decisions, poor communication and rising resentment. Spotting the red flags early can help business owners intervene before the dispute escalates into litigation or even dissolution. Understanding what common shareholder dispute warning signs look like is key to taking the steps needed to preserve the corporate relationship.

Why prompt detection matters

In a closely held company, shareholders often have multiple roles. This overlap can make conflicts especially disruptive. A minor strategy dispute can quickly turn into a fight over pay, access to information and control of the business. New Jersey law also recognizes that minority shareholders can be harmed through oppression in these corporations. This can lead to major legal remedies, such as buyouts and other court-ordered relief. Taking business partner conflict indicators seriously is crucial early on as finding solutions is easier before positions harden.

Communication breakdown

This is often one of the first warning signs of conflict between shareholders. Meetings stop or happen without some owners. Requests for key documents may be ignored or delayed. People may also start copying lawyers, accountants or trusted employees on routine emails. When shareholders stop sharing information, disagreements can lead to mistrust. To avoid this, business owners can restore formal governance and set clear rules for sharing information. A neutral third party can also help keep discussions on track before anyone turns to legal action.

Disagreements over business direction

Disputes can happen when shareholders disagree on the company’s direction, especially if they have different views on risk. Problems can also escalate if one shareholder changes their role, authority or day-to-day control without formal approval from the others. Often, these disputes are really about who has control and who gets to make decisions. If a shareholder feels left out of key choices, the conflict can quickly turn into a deadlock that puts the business at risk. To lower the risk of long disputes, set clear decision-making rights from the start. Shareholder agreements should state who can make major decisions and which actions need full approval. Tie-break rules, independent directors and regular reviews can also help prevent conflicts from growing.

Compensation and money disputes

In closely held companies, compensation is often the main way shareholders get value from the business, especially when dividends are rare or profits stay in the company. As a result, pay decisions are rarely purely financial and are often seen as issues of fairness, trust and control. Conflicts can occur when one shareholder believes another is receiving disproportionate benefits or using company funds for personal advantage. This problem can quickly escalate into allegations of self-dealing, oppression or breach of fiduciary duty. Setting clear decision-making rights from the start can lower the risk of long disputes. Additionally. shareholder agreements should state who can make major decisions and which actions need full approval. Additionally, the content on financial reports should be easy to understand so all shareholders can see how money is spent.

Operational conflicts

Another possible warning sign is when the business starts running like two separate companies. It can look like owners undermining each other in front of employees or customers or one shareholder builds a loyal group of employees and freezes out the other. Operational conflict is often the point where the dispute becomes expensive. Employee turnover rises and the company’s value can drop quickly, making any future buyout or exit more difficult. To address this, owners can clarify roles in writing, implement internal controls and adopt a dispute escalation clause to keep things amicable.

Preventing partnership disputes

When early signs of conflict appear, the goal is to clear up confusion, rebuild openness and set a practical path forward that protects the business. Many partnership disputes often worsen because assumptions go unchallenged or the parties continue operating without clear rules. When a dispute comes up, holding a formal shareholders’ meeting quickly to set clear guidelines can prevent the conflict from dragging on. If it cannot be settled right away, agreeing on temporary rules can keep the business running smoothly. Shareholders may also add a buy-sell clause to the agreement to give a clear way for exits if the relationship is beyond repair. It is also important to keep ownership matters separate from job-related matters to protect the business. Acting fast and setting clear steps can often solve the problem without harming the company or leading to avoidable court action.

Why early intervention is vital

Fixing problems early can often mean the difference between the business surviving and shutting down. When issues are spotted and handled quickly, companies can better manage costs, keep customer trust and prevent bigger financial or operational harm. Taking action early gives owners more choices. They may be able to restructure debt, improve cash flow or get outside help. In many cases, acting sooner helps a company stay open and prevents a full corporate relationship breakdown.

Real-life New Jersey cases

While every case is unique, there are a few notable New Jersey cases where addressing shareholder disputes early could have prevented litigation or dissolution, For example, Brenner v. Berkowitz (1993) highlights that shareholder oppression claims often arise when reasonable expectations are unmet. If those expectations are not written down, disputes can become costly and heavily focused on the facts. A well-written shareholders’ agreement can define those rules and include clear solutions, like buy-sell terms and valuation methods. This can lower the risk of lawsuits and help guide any future proceedings. The case of Bonavita v. Corbo (1996) shows the problems that can happen when a closely held business lacks cash access and clear ways for an owner to exit. After a 50% owner died, the remaining owner did not pay dividends to the widow. He paid himself a large salary and reinvested the profits instead. In the end, the court ordered the company to buy out her shares. Drafting a clear buy-sell agreement early, with triggers like death or disability, could have prevented the conflict and protected her ownership interest.

Planning ahead to prevent conflict

Creating a plan for business partnership dispute prevention is not about proving who is right. It is about building systems that stop disagreements from becoming conflicts that could end the business. A lawyer can assist in drafting strong shareholder agreements that help break deadlocks while protecting the company’s value.

When can you sue for trade secret misappropriation?

2026-07-23T15:33:43Z

Employees often leave a company with valuable knowledge and experience. While they are generally free to use their skills in a new job, they cannot take or misuse confidential business information that qualifies as a trade secret. When an employee improperly uses protected information after leaving a business, it may lead to trade secret litigation. Understanding when trade secret misappropriation occurs can help business owners protect valuable assets and respond appropriately.

What are the grounds for a claim?

A business may have grounds to file a claim when a former employee improperly acquires, uses, or discloses confidential information that qualifies as a trade secret. This often arises in employment litigation involving former employees who join a competitor or start a competing business. Not every piece of confidential information is a trade secret. To qualify for legal protection, the information generally must:

Have independent economic value because it is not publicly known
Be kept confidential through reasonable security measures
Provide a competitive advantage to the business

Examples may include customer lists, pricing strategies, manufacturing processes, proprietary software, marketing plans or technical designs. Trade secret misappropriation may occur when a former employee copies confidential files without permission, shares protected information with another company, or uses trade secrets to compete against a previous employer. In some cases, even information retained from memory may become an issue if it involves protected trade secrets rather than general knowledge or skills. Successful trade secret litigation may result in court orders preventing further use or disclosure of the information. A business may also seek financial compensation for losses caused by the alleged misappropriation. Depending on the circumstances, a new employer that knowingly benefits from the improper use of trade secrets may also face legal liability. Acting quickly is often important because evidence can disappear and confidential information may continue to spread once it has been disclosed. Businesses should also document the steps they have taken to protect confidential information, as these efforts may be relevant if a dispute arises. If you believe a former employee improperly used confidential business information, seeking legal guidance can help you evaluate whether trade secret misappropriation occurred and whether employment litigation or trade secret litigation may be appropriate under the circumstances.

What you must know before entering franchising in New Jersey

2026-07-14T11:10:41Z

New Jersey is a non-registration state, which means that you do not have to file, register or get approval from a state to start franchising your business. Despite this, you gain protections under the New Jersey Franchise Practices Act (NJFPA). As an entrepreneur planning to enter franchising, having a full understanding of your rights and state regulations is important.

Why a franchise relationship is unique

Starting an independent startup or partnership is significantly different from franchise relationships. A franchisor owns the brand and system, while a franchisee owns and operates the physical business asset. If you are planning to franchise a business, you pay for a system and give up significant independence. Investing your capital and labor to build the brand is part of the process, but you do not have a share in the brand’s intellectual property. This power imbalance aims to protect the franchisor, but the NJFPA sets rules to prevent an unjust relationship.

When franchisee rights protection applies

Gaining protection under the NJFPA may only apply if you meet these franchise legal requirements:

You conduct business in New Jersey.
The gross sales between you and the franchisor exceed $35,000 for 12 months.
You derive more than 20% of your gross sales from the franchise.

Satisfying these means you are safe from unfair practices of a franchisor. Under the NJFPA, a franchisor cannot cancel your contract without proper notice. They also cannot prevent you from joining a franchisee association. Additionally, franchisors cannot force you to sign a contract that waives your rights under state law.

What you should watch out for in agreements

Conducting a franchise agreement review in New Jersey before signing is crucial. This document heavily favors the brand owner, and signing without evaluation risks you of losing capital. Be wary of high-risk clauses that include:

Ambiguous Territory: Terms that allow a brand to open business near you

Undisclosed upgrades: Statements that do not define any operational changes that may occur mid-contract

Defined vendors: Provisions that give the franchisor full control over vendors to buy inventory, ingredients, packaging and software from

Vague marketing funds: Clauses that grant the franchisor the right to increase your contributions on advertising

Exit penalties: Conditions about fining you with costly penalties should you choose to close early.

Scrutinizing franchising agreements for red flags can be difficult due to legal jargon. Even if you may have experience in navigating contracts, a misunderstanding can result in a partnership that risks your livelihood.

Begin franchising with caution and legal guidance

Franchising can be lucrative, but you must be careful of what you sign. If a franchisor offers their terms, make sure to review it and negotiate your protections. You have the power to ask for larger protected territory to prevent internal competition or set expectations on operational upgrades. Additionally, define the steps for franchise dispute resolution when conflict arises. You can also ask a business attorney to review the agreement. They can break down the terms, explain them to you in simple language and offer insights into making the franchise relationship work for you.

How is AI use increasing litigation risk?

2026-07-11T00:02:18Z

The influence of artificial intelligence (AI) is seeping into ever-expanding areas of life. As a business owner, this is something you need to take seriously, as it can make businesses more likely to face legal action. Even if you have not embraced AI, many of those who work for you may have, whether you know it or not. Further, many of the other companies and members of the public you deal with are using it.

Errors resulting from its use

You have always been able to face legal action because of mistakes someone within your company makes, and that has not changed. The problem is that now, many people and companies are entrusting much of their work to AI. While AI can be useful, it can get things wrong. Actions are often taken based on what AI suggests without proper human oversight to catch its errors. However, if there is a problem, you cannot just blame AI. It is your company that will be held to account.

Emboldening people to act against you

AI has also increased the chances of people bringing a claim. In the past, if someone had a complaint, they might not have brought it because they felt they did not have any legal standing. They might have thought the cost of hiring someone to handle it for them would be too much. Yet now, by typing a few notes about the issue into AI, they can come up with what they believe is a legally sound plan of action. Before you know it, they have sent you a legal-sounding complaint or claim that they are confident will get the issue resolved in their favor. The information AI produces for them may be totally wrong, but you will still have to deal with it, and they may be convinced it is right due to the legalistic language and tone AI used. Seeking experienced legal counsel from a human can help you fight spurious claims. It can also help you handle disputes resulting from AI-made mistakes by your company.