Disputes between investors and business owners distract the focus of business and reduce profitability.  Business disputes distract the owners and managers of the business from the primary focus of the company of itself.  Today’s business environment is more challenging, competitive, and demanding that at any time in history.  The profitable operation and growth of a company require the entire focus and attention of its owners and managers.  When disputes arise between shareholders or members the company can lose focus and momentum, resulting in reduced profits and in some cases business failure.

The Watkins Firm has served San Diego and California corporations, LLCs and small businesses for more than four decades.  We understand the pressures of running a business, and the issues that arise in the relationships or local business professionals.  Disputes between investors and business owners usually boil down to money.  Many business people are surprised to learn that the likelihood of disputes actually increases as a business thrives and the money rolls in.  How do you reduce the likelihood that a dispute between the owner(s) of a business and it’s investors or shareholders will distract the focus of business, and prevent expensive business litigation?

The key is the development and continuous update of sound operating agreements and shareholders agreements, as well as corporate bylaws.  These critical business documents should be well crafted to anticipate every possible business or personal challenge, while providing specific strategies and contingency plans for handling them should they arise.  These agreements specify the roles and responsibilities of each member or investor, as well as how income and profit will be handled at each point of your company’s life.

Pro-Tip: “we want to get the facts down and we want the evidence they have in chronological order, because that’s the best way to communicate to a third party, to anyone is in chronological order. That’s how we think. Then I want to help our clients analyze the damages. Whether you are feeling like they owe you something, they’re not complying with the agreement or vice versa. More than just understanding the issues and damages, we need to analyze what it’s going to cost to fight. And also look at the future business. Whether we can salvage this relationship, all of those important things should come into play, so that we can provide good, sound advice. Sometimes we’ll even advise our clients how we would think about it and then let them go talk to their partner or whoever they’re dealing with on their own armed with our knowledge and our negotiation technique.

For example, we had a case a long time ago, nine or 10 doctors were working together in our medical practice. And our two or three doctors were worried about something. They came to us and over that weekend, the managing members of the medical corporation took the entire practice, and moved. It changed its phone number, location, changed its mailing address and took all the money and assets and bank accounts. Didn’t even tell the other partners where they were going. They showed up for work on Monday and there was no more work. The practice had disappeared overnight down the street to a different facility with instructions to keep them out. So knowing something might be going on is the time to come to your lawyer, so that A) we can do things to discover whether there’s really something going on, and B) there are remedies in the law that can stop that.

Knowing the facts, the damages, the law of the damages key, because that gives your lawyer the ability to predict what would happen if you went to trial tomorrow and you won, what would you win? That’s it, that’s the number. Because in civil court, we’re only looking at dollar amounts and getting there and understanding human nature. That’s another thing, right? Preparation for my clients has to do with damages, the law and damages the facts, getting all the facts down so that we have things to say and then informing my client. We cannot just go in there and say, here’s the right number. Here’s what I’ll settle for. I’m done talking that doesn’t work.” – Dan Watkins, Founding Partner

Disputes between investors and business owners can be costly and time consuming.  We invite you to review our podcast Episode 10 – The Importance of a Strong Corporate Attorney as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.  We work with clients to create, update, or amend shareholder agreements and operating agreements to ensure smooth business operations, and to reduce the opportunity for and likelihood of expensive and distracting business litigation.