Principal Attorney
Business partnerships are built on trust, transparency, and shared responsibilities. But when a partner breaches their legal duties or violates the terms of your partnership agreement, it can jeopardize your company’s operations, reputation, and financial health. In Texas, you have legal options—but removing a partner isn’t always straightforward.
From Sul Lee Law Firm, here’s what Texas business owners need to know about removing a partner who has breached their fiduciary duty or contract.
Common Types of Breaches in Business Partnerships
In Texas, business partners owe each other fiduciary duties, including loyalty, care, good faith, and full disclosure. When one partner fails to meet these obligations or violates a written or verbal contract, the consequences can be severe.
Common breaches include:
- Misappropriation of company funds
- Self-dealing or competing with the partnership
- Failure to perform agreed-upon duties
- Withholding important business information
- Signing unauthorized contracts
Whether the breach is intentional or due to negligence, Texas law allows for remedies—including potential removal.
Step 1: Review Your Partnership Agreement
Your first step should always be reviewing the partnership agreement. A well-drafted agreement should include:
- Grounds for removal of a partner
- Procedures for initiating a removal vote or legal action
- Buyout clauses or valuation methods
- Dispute resolution provisions (e.g., mediation or arbitration)
If your agreement outlines a procedure for removing a partner, follow it carefully to avoid triggering further legal complications. If no removal clause exists—or the breach is especially egregious—you may need to escalate to litigation under Texas partnership laws.
Step 2: Document the Breach
Before taking action, gather clear evidence of the breach. This may include:
- Financial records or bank statements
- Emails or internal communications
- Witness statements from employees or clients
- Contracts or agreements showing misconduct
Having a clear, documented timeline of events can make or break your case if legal proceedings are necessary.
Step 3: Attempt Internal Resolution
Texas courts often expect partners to attempt internal resolution before initiating formal litigation. This can include:
- Private conversations or mediation
- Calling a formal partner meeting
- Issuing a written demand for correction
These steps may not remove the partner immediately, but they can show good faith effort on your part if the dispute escalates.
Step 4: Consider Judicial Expulsion (If Necessary)
If internal efforts fail, Texas law does provide for judicial expulsion under the Texas Business Organizations Code (TBOC). You may be able to file a lawsuit asking the court to remove the partner for:
- Willfully or persistently breaching the partnership agreement
- Engaging in conduct that makes it not reasonably practicable to carry on the business
- Misconduct that substantially harms the partnership
This process is complex and typically requires the guidance of a skilled business litigation attorney familiar with Texas courts.
Step 5: Execute a Buyout or Wind Down
Once a partner is removed, you’ll need to address the financial and operational consequences. This may involve:
- Triggering a buyout clause to pay the removed partner their share of the business
- Amending business filings or ownership records
- Notifying customers, vendors, and regulatory bodies
- Dissolving the business entirely if no viable path forward exists
Legal counsel is essential in these final steps to ensure compliance with both your internal agreements and state law.
When You Need Legal Support
Removing a partner for breach of duty or contract is a high-stakes decision that requires careful strategy and legal precision. Texas courts expect business owners to follow proper procedures, meet evidentiary standards, and act in the best interest of the company—not out of personal retaliation.
At Sul Lee Law Firm, we help business owners across Texas navigate complex partnership disputes and protect what they’ve built. Whether you’re preparing for litigation or trying to resolve matters privately, we provide the trusted legal guidance you need to move forward. Contact us today for a confidential consultation.