Whether you’re already in a partnership or you are thinking of forming a partnership, you need experienced legal guidance to help you navigate the unique challenges that come with this type of business arrangement.
At Kennelly Business Law, we serve clients in Fargo-Moorhead, Valley City, and Wahpeton, and throughout the surrounding communities of eastern North Dakota and western Minnesota, assisting them with everything from structuring their businesses to drafting partnership agreements to resolving disputes. Contact us today for an initial consultation with a skilled business contract lawyer, and let us help you create the outcome you want.
How Business Partnerships Work
A partnership refers to a type of business entity in which two or more parties own the business together. Some of the primary characteristics of business partnerships are:
- Shared ownership among the partners
- Joint decision-making among general partners
- Distribution of profits and losses among partners
- Fiduciary duties owed by partners to each other and the partnership
- Pass-through taxation, which makes partners liable to pay taxes on the partnership’s income
North Dakota state law governs the management and operation of partnerships formed or located in the state, and most partnerships must register with the Secretary of State. However, parties can form a general partnership without registering it, but they must register the business name under which the partnership will operate.
Types of Partnerships in North Dakota and Minnesota
Business partnerships can take several forms, including:
- General partnership: Each partner has equal management rights and responsibilities. Partners also share the business’s assets and liabilities, and the death or withdrawal of a partner dissolves the partnership. Partners can form a general partnership without filing registration documents with the state or holding a formal organizational meeting.
- Limited partnership: A limited partnership has one or more general partners and one or more limited partners. General partners exercise management control of the business and have full liability for the partnership’s obligations. Limited partners invest capital in the business and share in its profits, but do not have liability beyond their investment. Limited partners generally do not participate in management.
- Limited liability partnership: In a limited liability partnership, all partners participate in the management of the business, but do not have liability for the business’s debts or obligations beyond their own financial investment in the company.
- Limited liability limited partnership: Limited liability limited partnerships resemble limited partnerships, except that general partners also have limited liability protection like the limited partners.
- Professional limited liability partnership: A professional limited liability partnership is a specific type of limited liability partnership owned by licensed professionals, such as physicians, architects, accountants, or lawyers.
An experienced business lawyer can advise you on the partnership arrangement that is most suitable for your particular situation and goals.
The Importance of Partnership Agreements
Partnerships often have a written partnership agreement that governs the management of the business and the rights of the partners among themselves and with the partnership. A partnership agreement can have various provisions, including:
- Equity ownership percentages held by each partner
- Partners’ capital contributions
- Management roles
- Voting rights, including procedures for calling partner meetings and majority thresholds to approve various decisions
- Profit and loss distributions
- Partner compensation
- Partner withdrawal or expulsion procedures
- Buy-sell provisions
- Dissolution procedures
- Dispute resolution procedures
- Restrictive covenants, such as non-disclosure, non-solicitation, and non-compete provisions
State law governs partnerships in the absence of a written partnership agreement. However, without a partnership agreement in place, partners are at greater risk of disputes over how to allocate profits or management authority, which can also be more difficult to resolve.
Duties of Business Partners
Partners in a partnership may owe various duties to each other and to their business. First, partners have fiduciary duties that govern their actions as partners. These fiduciary duties can include:
- Duty of loyalty, which requires a partner to act in the partnership’s best interests, including refraining from acting under a conflict of interest or engaging in self-dealing
- Duty of care, which requires a partner to act prudently when managing the business
- Duty of good faith, which requires a partner to act fairly towards their fellow partners
Partners also have financial responsibilities to the business governed by the partnership agreement and the law. For example, a partnership agreement may govern a partner’s capital investment obligations, including the initial capital they must contribute upon entering the partnership and their obligation to contribute to capital calls approved by the partnership. State law or the partnership agreement can also determine the allocation of partnership losses among the partners. Partners also must pay their share of the partnership’s tax liabilities. Finally, general partners typically bear financial responsibility for the partnership’s debts and liabilities.
Partners can also have various operational responsibilities. General partners typically share management authority for the business. Each partner usually has apparent authority to bind the partnership to contracts and obligations in the ordinary course of business, such as entering into contracts for goods or services.
Partnership Disputes and Dispute Resolution
The intimate nature of business partnerships makes disagreements between the partners almost inevitable. Sometimes, these disagreements boil over into legal disputes, even litigation. Common examples of partnership disputes include:
- Disagreements over profit sharing
- Allegations of breaches of fiduciary duties
- Misuse or misappropriation of partnership assets
- Failure or refusal to contribute to capital calls
- Disagreements over management decisions or the business’s strategic direction
Partners may have various options for resolving disputes. Partnership agreements may include dispute-resolution provisions requiring partners to submit disputes to mediation, neutral experts, or arbitration. Alternatively, a partner may file a lawsuit to seek relief or a resolution of a dispute in court.
At the law firm of Kennelly Business Law, we are well-versed in partnership disputes and how to resolve them. Contact us today if you need help with your business in Fargo, Valley City, or Wahpeton, ND.
Why Choose the Fargo Business Lawyers of Kennelly Business Law?
Whether you’re currently involved in a business partnership in Fargo, Valley City, or Wahpeton, or you’re thinking about starting one, you need an experienced business partnership attorney to help you succeed. Let Kennelly Business Law help you with your business partnership because:
- Our attorneys have earned recognition for the dedicated work they provide for our clients. Attorney Chris Kennelly has received listings in North Dakota Super Lawyers from 2023 through 2025 and the highest AV rating from peer-review service Martindale-Hubbell. Attorney Ben Williams has also received listings on the Super Lawyers Rising Stars list from 2021 through 2024. Attorney Jeff Gunkelman also earned a listing as a Rising Star in 2022.
- Our law firm calls North Dakota home. Our families have lived here for generations, and we come from a long line of owners and operators of businesses in the state. That’s why we have devoted our legal careers to serving North Dakota companies and their owners.
- Our law firm works hard to earn each client’s trust. Our dedication to success has led many clients to return to our law firm over the years for continued guidance and support with the various legal issues that arise in business. Our clients choose to work with us for our reliability, trustworthiness, knowledge, and empathy.
We are proud to serve clients from our office locations in Fargo, Valley City, Wahpeton. Let us put our experience and commitment to excellence to work for you.
Contact Our Law Firm for Experienced Counsel in Business Partnerships
When you have issues or questions about your business partnership, get the experienced counsel you need to protect your interests. Contact Kennelly Business Law today for a confidential consultation with our law firm’s knowledgeable business partnership attorneys about your issue, and we’ll give you legal advice grounded in business reality.
