You split up with your partner on Friday, and by Monday they have opened a shop down the street with three of your key employees and your biggest account. The shock is real, the damage immediate and the clock is ticking. When a business partnership dissolves and your former partner becomes your direct competitor, understanding your legal remedies is not just important — it is urgent.
When partnership agreements meet reality
Partnership agreements include many provisions, including those related to exit strategies. These often include restrictive covenants designed to protect the business after a split. These provisions typically address non-compete obligations, client non-solicitation and employee raiding. When a departing partner takes clients, employees or proprietary information, several legal claims may apply, potentially including:
- Trade secret misappropriation: If your former partner has taken client lists, pricing strategies, business methods or other confidential information, you may have grounds for immediate legal action to protect your trade secrets.
- Breach of fiduciary duty: Partners owe each other fiduciary duties that extend until the partnership formally dissolves. Soliciting clients or employees while still a partner often constitutes a breach.
- Violation of restrictive covenants: Non-compete and non-solicitation clauses in your partnership agreement may provide the fastest path to relief, assuming they are properly drafted and reasonable in scope.
It is in your best interests to act promptly. A preliminary injunction early on can mitigate the damage.
The changing non-compete landscape
The enforceability of non-competes is shifting rapidly. While the FTC’s proposed ban on non-competes faces legal challenges, many states are restricting their use. However, partnership dissolutions often receive different treatment than standard employment relationships. Courts recognize that partners have greater access to sensitive business information and client relationships, making reasonable restrictions more defensible.
Protect your business interests
When a partner defects and opens a competing business, every day matters. Document everything, preserve evidence of client and employee solicitation and consult with an attorney experienced in partnership disputes immediately. The difference between protecting your business and watching it crumble often comes down to how quickly you respond. Your partnership agreement gave you tools — now is the time to use them.