Breach of Business Agreement Legal Services
There many types of business contracts used in Illinois and throughout the United States—and the world for that matter. Each specific business contract depends on the nature of the transaction and the needs of the parties and businesses involved. Aside from promissory notes, purchase agreements, service agreements, manufacturing agreements, employment agreements, non-disclosure agreements and non-compete agreements, there are also operating agreements shareholder agreements and partnership agreements that are designed to define business relationships between individuals and entities. The latter type of agreement will the topic of this discussion. So, when we say breach of business agreement, we mean a breach of an operating agreement, shareholder agreement, partnership agreement or some other agreement between owners of a company.
Much like other types of agreements, operating agreements, shareholder agreements and partnership agreements often become the subject of heated contract disputes. These business agreements are typically between business owners and business partners, where disputes over the entity’s value, a party’s ownership interest in the company, a party’s compensation, or a party’s duties to the company, among other disputes, are not uncommon.
Operating Agreements – Limited Liability Company
An operating agreement is a contract that governs the operations of a limited liability company (LLC), and sets out the rights and responsibilities of the members, as well as the management and decision-making structure of the LLC. An operating agreement is not required by law in Illinois, but it is highly recommended, as it can help to prevent disputes among members and provide guidance for how the LLC should be managed. Without an operating agreement, the LLC may be subject to the default provisions of the Illinois Limited Liability Company Act (805 ILCS 180/1-1, et seq), which may not be suitable for the needs of the particular LLC.
An operating agreement does a number of things. It typically sets forth the ownership structure of the LLC, including the rights and responsibilities of the members, as well as the management and decision-making structure of the LLC. The operating agreement outlines the capital contributions made by each member, and the percentage of ownership that each member has in the LLC. It also sets forth how profits and losses are allocated among the members, and may include provisions related to distributions and tax matters. The operating agreement sets forth the voting rights of the members, including the procedures for voting on important matters, such as the admission of new members or the sale of the LLC. Operating agreements often include provisions related to the transfer of membership interests, including restrictions on transfer or a right of first refusal. An operating agreement is an important document for any LLC, as it provides guidance to the members on how the LLC should be managed and operated.
Shareholder Agreements – Corporations
A shareholder agreement, much like an operating agreement, outlines the rights and obligations of shareholders of a corporation. The agreement typically sets out the terms and conditions of the shareholders’ ownership of the corporation, including their voting rights, the transfer of shares, and the management and operation of the corporation.
A shareholder agreement sets out the rights and obligations of the shareholders, including their voting rights, rights to dividends and other distributions, and their obligations to contribute capital to the corporation. The agreement may set out the procedures for the transfer of shares, including any restrictions on transfer and a right of first refusal. Shareholder agreements set out the procedures for electing directors, the powers of the board of directors, and the duties and responsibilities of the officers of the corporation. Shareholder agreements also include provisions for resolving disputes among shareholders, including mediation, arbitration, or other forms of alternative dispute resolution. Such agreements also set out the circumstances under which the shareholder agreement may be terminated, for example, upon the sale of the corporation or the death or disability of a shareholder A shareholder agreement is an important document for any corporation with multiple shareholders, as it can help to prevent disputes among shareholders and provide guidance for the management and operation of the corporation.
Partnership Agreements – Partnerships, Limited Partnerships, and Limited Liability Partnerships
A partnership agreement is a legal document that outlines the terms and conditions of a partnership. A partnership is a business structure in which two or more individuals or entities work together to carry on a business for profit. A partnership agreement sets forth the rights and responsibilities of the partners, and provides guidance for the operation and management of the partnership.
A partnership agreement typically includes provisions related to the partnership structure, including the names and roles of the partners, the duration of the partnership, and the purpose of the partnership. A partnership agreement will also outline the capital contributions made by each partner, the percentage of ownership that each partner has in the partnership, set forth how profits and losses are allocated among the partners, and may include provisions related to distributions and tax matters. A partnership agreement will also set forth the management and decision-making structure of the partnership, including the roles and responsibilities of the partners, and the procedures for making decisions and resolving disputes. The agreement may include provisions related to the transfer of partnership interests, including restrictions on transfer and a right of first refusal as well as the procedures for dissolving the partnership, including the distribution of assets and the winding up of affairs.
The Illinois Uniform Partnership Act (1997) (805 ILCS 206/100 et seq.) is a state law that governs partnerships in Illinois. The act provides a framework for the formation, operation, and dissolution of partnerships, and sets forth the rights and responsibilities of partners.
The act defines a partnership as an association of two or more persons who carry on as co-owners a business for profit. Under the act, partnerships are distinct legal entities from their partners, and are responsible for their own debts and liabilities.
Some of the key provisions of the Illinois Uniform Partnership Act include:
Formation: Partnerships may be formed by agreement, either written or oral, and may include general partnerships, limited partnerships, and limited liability partnerships.
Partner rights and responsibilities: Partners have the right to participate in the management and operation of the partnership, and are entitled to share in the profits and losses of the partnership according to their agreed upon shares
Liability: Partners are jointly and severally liable for the debts and obligations of the partnership, and may also be individually liable for their own actions.
Dissolution: Partnerships may be dissolved by agreement of the partners, or by operation of law, such as the death or withdrawal of a partner. The act sets forth procedures for winding up the affairs of the partnership and distributing the assets.
Uniformity: The Illinois Uniform Partnership Act is based on a model act developed by the National Conference of Commissioners on Uniform State Laws, and is intended to provide a consistent framework for partnerships across different states.
Breach of Business Agreements
A breach of a shareholder agreement operating agreement or partnership agreement is similar to any other breach of contract and occurs when a party to the agreement fails to perform their obligations under the terms of the agreement. The specific consequences of a breach will depend on the terms of the agreement, as well as the nature and severity of the breach. As with other agreements, the non-breaching party could be entitled to monetary damages, specific performance, rescission, injunctive relief, liquidated damages, and attorneys’ fees and costs, among other damages.
Litigating Business Agreements In Illinois
Litigating business disputes in Illinois involves taking legal action to resolve disputes related to the ownership, operation or management of a business. It is important to review the underlying business agreement or law/statute that governs the dispute, such as a contract, business agreement, or Illinois statute.
Gather evidence: The next step is to gather evidence to support your claim, such as emails, financial statements, and other relevant documents.
File a complaint: If informal attempts to resolve the dispute are unsuccessful, you may need to file a complaint with the appropriate court, such as the circuit court in the county where the business is located
Serve the defendant: Once the complaint is filed, you must serve the defendant with a copy of the complaint and a summons, which informs them of the legal action being taken against them.
Discovery: Both parties may engage in discovery, which involves exchanging information and documents related to the dispute.
Settlement negotiations: Before going to trial, the parties may engage in settlement negotiations to try to resolve the dispute out of court.
Trial: If the case goes to trial, both sides will present their evidence and arguments to a judge or jury, who will decide the case based on the evidence presented.
Remedies: If the court finds that there has been a breach of the agreement or other legal obligations, it may award remedies such as monetary damages, specific performance, or injunctive relief.
Contact Our Chicago Business Attorneys
If you’re encountering difficulties with breaches of business agreements, including operating agreements, partnership agreements, or shareholder agreements, our business attorneys are equipped to provide the assistance you need. We prioritize understanding your business and legal objectives to offer tailored advice and robust representation. Our attorneys handle breach of contract cases for businesses, professionals, and entrepreneurs throughout the Chicagoland area, including Cook, DuPage, Kane, Lake, Lee, McHenry, Will and Winnebago counties. Please reach out to our law firm to see how we may assist.