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<\/strong>The U.S. businesses consist of sole proprietorships or various forms of partnerships and corporations.\u00a0 It\u2019s not unheard of that solo businesses enter business ventures with other businesses. \u00a0Due to the tough economy, more and more business partners join business partnerships with each other than before to survive.\u00a0 A business partnership union can be compared to a marriage.\u00a0 Like in a marriage, a business partnership has a honeymoon period filled with well-meant, and perhaps, not-so-well-meant promises.\u00a0 Then, there is a drudgery of ins and outs of a daily and weekly workload and activity with potential lack of communication may lead to contempt and breach of respect and\/or trust.\u00a0 Does it sound too familiar?\u00a0 Yes.\u00a0 That\u2019s because it happens all the time.\u00a0 Luckily, there are ways to prevent a fall out, and in case if it\u2019s too late, peacefully depart.\u00a0 Similarly to a good marriage, a personal responsibility and entering the business partnership with the idea that nothing in this world is permanent is the key to success.<\/p>\n There are many issues that can arise among partners and wreck a business partnership.\u00a0 For example, a closed company shareholder dispute over under performance, a lack of sufficient capital and an increase in business expenses, a breach of fiduciary duty, among other things such as including but not limited to business debt collection and\/or personal disputes.<\/p>\n A scenario where business partners are partnering with each other instead of hiring happens all the time.\u00a0 Sharing household tasks is not an unfamiliar approach.\u00a0 In short, two or more partners with different set of skills agree to make an input and be responsible for separate aspect(s) of the business.\u00a0 Sometimes one partner\u2019s particular or unique skill or service in the beginning is what brings the company to its success.\u00a0 Later, someone could be hired instead of him.\u00a0 At one point, one of the partners may think that hiring someone else with the same set of skills would be a cheaper alternative than to retain the original business partner leading to a rift in the relationship affecting the daily business flow.\u00a0 Perhaps, communicating would have helped.<\/p>\n There are many issues that can arise among partners and financial outcome be at stake.\u00a0 For example, a conflict may arise in a closed company shareholder dispute may arise over an under performance, a lack of sufficient capital and an increase in expenses.\u00a0 That can lead to a breach of fiduciary duty, and unfulfilled promises and wreck a business flow.\u00a0 In addition, a simple business debt collection suit by a creditor or personal disputes can lead to a prolonged grudge.\u00a0 This is exactly what happened in one of the cases in Massachusetts<\/strong>.\u00a0 See, Weiler v. PortfolioScope, Inc<\/strong>., 83 Mass. App. Ct. 216 (2013).<\/p>\n In Weiler, the business structure<\/strong> involved a complex array of partnerships among companies and individuals making separate contractual agreements and obligations.\u00a0 The outcome resulted in securities regulations preempting over contractual agreements between the parties because there was a properly secured and timely perfected creditor.<\/p>\n Milton Weiler (Weiler), the plaintiff in this case, was a President and CEO of the PorfolioScope, the defendant.\u00a0 Weiler developed a certain portfolio that became a part of PortfolioScope, Inc. (PortfolioScope).\u00a0 PortfolioScope is an entity formed when formerly named Spencer Trask acquired Computer Aided Decisions (CAD) and CAD Research along with Plaintiff\u2019s, among with Weiler\u2019s, software.\u00a0 In 2008, PortfolioScope sued iFlex Solutions, Ltd for the theft of trade PortfoliosScope\u2019s secrets software.\u00a0 The case with iFlex Solutions Ltd. settled and PortfolioScope was to receive a lump-sum payment in the amount of $10 million.\u00a0 However, in 2002, Weiler resigned leading to replacing of the CEO within the company.\u00a0 Through a stock option purchase and the sale agreement with PortfolioScope, Weiler, in exchange for the sale of his portion of ProtfolioScope, retained the right to five percent (5%) of its net proceeds received in connection with the iFlex Solutions, Ltd.<\/p>\n Plaintiff argued that PortfolioScope breached the agreement with the plaintiff to pay (5%) of the proceeds from a settlement related to a pending lawsuit between PortfolioScope and iFlex Solutions.\u00a0 See, Weiler, at 218.<\/p>\n The main issue<\/strong> was whether an agreement between the plaintiff and the defendant stating that the plaintiff was entitled to 5% of defendant\u2019s net proceeds in connection with the third party litigation gave the plaintiff a priority over a secured creditor who had a preferred his claim.\u00a0 The Trial court held that the agreement gave Weiler the priority of payment and said that the defendant \u201cwas required to pay because the agreement did not mention any creditor, secured or unsecured.\u201d See Weiler <\/em>218-223.<\/p>\n The Appeals Court of Massachusetts, however, disagreed with the trial court and interpreted the effect of the contract between the parties differently.\u00a0 The Court said that the payment was simply one of several parts of the consideration for the sale of his stock options back to the company\u2026\u00a0 The court held that \u201cPortfolioScope lacked authority to encumber collateral preciously securitized in favor of the creditor\u2026\u201d\u00a0 \u201cThe resolution of priority conflicts is governed by the general rule \u201cfirst in time, first in right\u201d See Weiler 225-226.\u00a0 Because the creditor did not subordinate his interest to Weiler, \u201cWeiler was an unsecured creditor, whatever the nature of his interest in the settlement proceeds, was not superior to other creditor who had their interest secured.<\/p>\n Communication is crucial.\u00a0 Comparisons with marriage aside, writing is a great communication tool.\u00a0 While its not always perfect it can show the meaning among the parties.\u00a0 A well drafted agreement between partners could divert a disaster by laying out possible creditors.\u00a0 It can also minimize the possibility of misinterpretation and help to avoid losses and costly litigation.<\/p>\n <\/p>\n Written by Margarita Smirnova, Esq.<\/p>\n If you have a specific question relating to your business, please contact Margarita<\/p>\n Call: (617)398-7482<\/p>\n E-mail: margarita.smirnova@gmail.com<\/p>\n","protected":false},"excerpt":{"rendered":" The U.S. businesses consist of sole proprietorships or various forms of partnerships and corporations.\u00a0 It\u2019s not unheard of that solo businesses enter business ventures with other businesses. \u00a0Due to the tough economy, more and more business partners join business partnerships with each other than before to survive.\u00a0 A business partnership union can be compared …<\/p>\n