4 Types of Partnership Disputes

If you’re like the majority of business partners, you probably started your venture with an abundant amount of good feeling towards your partners and never imagined that one day you would be embroiled in a dispute with them. All too often, however, partnerships end in acrimony caused by disagreements over money or management of the business. Failed partnerships create financial problems for the business, but the personal cost can be quite high too for people who find themselves fighting with business partners who are family members or close friends. Though every situation is unique, it can be helpful to know what commonly causes partners to run into conflict and how to avoid these types of problems. 

1. Breach of fiduciary duty. Owners, members, and partners of any business have a deep-seated obligation to act solely for the benefit of the company. No business partner should pursue other commercial interests that would undermine the profitability of the partnership or should conceal crucial information from the other decision-makers in the business. 

2. Lopsided partnership contributions. If workloads and personal benchmarks are not clearly defined, a dispute may arise when a partner is perceived to be contributing insufficient time and effort or not securing the results expected by the other partners. 

3. Confusion about authority. Not drawing boundaries between partners to delineate authority or clarify the decision-making process is a common cause of partnership disputes. Arguments may arise over who is responsible for what, or there could be conflict over whose opinion should prevail when there is disagreement about how best to proceed.

4. Breach of contract. A well-written and effective partnership agreement can help prevent the problems outlined above by defining what is expected of each partner, including work and financial obligations. A breach of the partnership agreement can also trigger a dispute among partners, but such disputes tend to be easier to resolve because all expectations are clearly defined, making it easier to identify the breach and to hold the breaching party accountable.

Ensuring Healthy Relationships With Your Business Partners

The best way to protect your partnership is to define this relationship as clearly as possible in a well-crafted partnership agreement. An experienced business attorney can help you formulate the right terms and conditions for your particular situation, including the allocation of ownership, the division of profits and losses, the assignment of decision-making powers, and much more. Perhaps most importantly, such an agreement can determine how potential conflicts will be identified and resolved and provide a blueprint for what to do in the event that a partner dies or withdraws so that such disruptions can be handled smoothly without triggering expensive conflict.

If you need a strong partnership agreement to protect your business from internal strife, contact IGC. If you are already struggling with your partners, IGC can help with that too. We have successfully resolved many such disputes, and we would be happy to assist you too. Reach us here through our website or call us at 925-399-1529.

Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.