These 3 issues are common sources of partnership disputes

On Behalf of | Nov 5, 2021 | Business Law & Litigation |

Taking on a business partner is largely a beneficial choice. You split the risks and obligations of running a company with someone else. You have a second set of eyes and an alternative perspective helping you make more intelligent and thoughtful decisions. There is someone else who probably knows the ins and outs of the company if you ever have an emergency, and you have support when you need to go into a major negotiation or contemplate big changes for your company.

Unfortunately, a business partnership is still an interpersonal relationship, which means the risk for conflict is never that far away. You and your business partner could get into a major dispute that could affect your current relationship or even the solvency of your business. What are some of the most common sources of partnership disputes?

Inadequate or vague partnership agreements

Most of the technical and legal aspects of your relationship stem from the terms the two of you set in your partnership agreement. Good partnership agreements address everything from investment and work schedules to compensation and when the business might close or go up for sale.

Partners can also address how to handle disputes between the two of them or the criteria for one partner to buy the other out. When you have not established these terms in writing, each of you may have unspoken expectations that the other fails to meet.

Misconduct by one partner

Sometimes, partners who were very proactive about establishing their responsibilities to one another and roles in the company still get into major disputes over the actions of one partner.

If one partner engages in unethical business practices, like negotiating a price-fixing agreement with another business, that puts the entire business at risk and may strain their relationship with their partner. In a situation where the conduct affects the business, such as embezzlement, that can also lead to a sense of betrayal. 

Disagreements about what to do when the business thrives or struggles

A business going from barely in the black to turning down projects because there’s too much demand can be as difficult for owners to operate as a business that is in the red.

Partners can start to blame one another or take out their frustrations on each other when a business they both invested in doesn’t gain traction. They could also become angry at one another if they don’t agree about the best way to handle success, whether one partner wants to sell or wants to open numerous other locations.

These kinds of disagreements can affect your relationship with one another and even the daily operations of the business. Addressing possible concerns in your partnership agreement and being proactive about addressing disputes when they first arise could help you preserve your relationship and protect your shared business.