Partnership Disputes in Maryland: What a Maryland Business Law Attorney Wants Owners to Know

Two people start a business on a handshake, split the work by instinct, and never write anything down. It runs fine for years. Then one wants out, or wants more, or puts a spouse on the payroll, and nobody agrees what the arrangement ever was. Most partnership fights a Maryland business law attorney sees do not begin in bad faith. They begin with an agreement nobody drafted, and statutory defaults answering questions the partners assumed were settled.

What law governs a Maryland partnership with no written agreement?

Maryland’s Revised Uniform Partnership Act (Md. Code, Corporations and Associations, Title 9A) supplies the terms the partners did not. A general partnership exists once two or more people carry on a business as co-owners for profit, whether or not anything was filed with the state and whether or not they ever used the word. The defaults surprise people:

• Profits and losses are shared equally, no matter who put in the capital, unless the partners agreed otherwise
• Each partner has an equal say in management, with ordinary business decided by majority and anything outside the ordinary course requiring unanimous consent (§ 9A-401)
• No partner is entitled to pay for services, so the one working sixty hours a week has no automatic right to a salary
• Every partner may inspect the books, which must be kept at the chief executive office (§ 9A-403)

A written agreement can change nearly all of this. Without one, the partner who put in 90 percent of the money and expected 90 percent of the profits is arguing against the statute.

Can a partner take clients or start a competing business?

Not while the partnership is running. Section 9A-404 imposes a duty of loyalty requiring a partner to account for any benefit derived from partnership business or property, to avoid dealing with the partnership as an adverse party, and to refrain from competing with it before dissolution. The companion duty of care is narrower than clients expect: it bars gross negligence, recklessness, intentional misconduct, and knowing violations of law, not ordinary bad judgment.

After a partner dissociates, the loyalty duty continues only as to matters arising before the departure (§ 9A-603). That timing distinction decides cases. A partner who forms a competing entity and routes work to it while still drawing distributions faces a very different claim than one who resigns first and competes second.

How is a departing partner’s interest valued and paid?

When a partner leaves and the business continues, the partnership must buy out that interest. Under § 9A-701 the price is the greater of liquidation value or the value of a sale of the entire business as a going concern without the departing partner, measured at the date of dissociation, plus interest.

Timing matters as much as the formula. If the parties cannot agree on a number, the partnership must pay its own good-faith estimate in cash within 120 days of the departing partner’s written demand, and that partner then has 120 days after the offer to sue over the amount. A partner who withdraws early from a partnership set for a definite term may see payment deferred until the term ends absent undue hardship, and may owe damages for wrongful dissociation under § 9A-602.

Because a going-concern valuation drives the outcome, the real fight is over the books. Personal expenses run through the business, unrecorded owner draws, and revenue that landed in a partner’s separate entity all move the number.

Am I personally liable for what my partner did?

In a general partnership, yes. Partners are jointly and severally liable for partnership obligations under § 9A-306, so a creditor can pursue your personal assets for a debt your partner incurred. Registering as a limited liability partnership changes that exposure going forward, and Maryland entities keep the status current by filing an annual report with the State Department of Assessments and Taxation by April 15 each year.

Leaving does not end the risk on its own. For up to two years after departure, a dissociated partner can still bind the partnership in dealings with third parties who reasonably believed the partnership continued (§ 9A-702), and stays liable to them. Filing a statement of dissociation with the state cuts this off, with third parties deemed to have notice 90 days after filing. Written notice to banks, insurers, landlords, and regular customers is the other half of the job.

How long do you have to bring a partnership claim?

Three years from the date the claim accrues, under Md. Code, Courts and Judicial Proceedings § 5-101, which covers breach of contract, breach of fiduciary duty, and accounting claims between partners. An accounting action under § 9A-405 is often the most useful first move, since it forces disclosure of records a partner has been withholding.

If the partnership cannot function, a circuit court may order dissolution and winding up when a partner’s conduct makes it not reasonably practicable to carry on the business (§ 9A-801). Most of these disputes still settle, through a buyout, a division of clients, or one partner taking the entity and the other taking a note.

Every one of these problems is cheaper to prevent than to litigate. A short written agreement setting profit splits, decision thresholds, a valuation method, and an exit process is worth more than years of goodwill. If a partner has stopped sharing financials or the arrangement is already strained, a conversation with a Maryland business law attorney before anyone sends a formal withdrawal notice preserves options that vanish once the letters start flying. Bring what documents exist, including tax returns, bank records, and early emails about how the business was set up.