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Types of Partnership Disputes

In any business partnership, the relationship for the parties is as important as social and familial relationships. Loyalty, trust, and respect are expected.

Partners owe the business and each other fiduciary duties. These are well stated in the partnership agreement and revolves around responsibilities and expectations of conduct in all business matters.

Breach of trust

A breach of fiduciary duty sows the seeds of mistrust in the relationship.

Common breach of fiduciary causes of disputes in business partnerships include:

· Starting or joining a competing company

· Partner leaves and asks customers and employees to accompany him/her

· He/she stops giving his corporate business his full effort

· A partner makes important decisions unilaterally, without consulting his partner

· He/she does not keep her partner informed of business problems

Disputes in performance and expectations

Other problems can arise in partnerships that do not involve a breach of fiduciary duty.

For instance: After many years of a great partnership, the commitment wanes. Their priorities may change.

One partner may not appreciate the value the other person brings to the partnership. This dispute mostly arises where goals and responsibilities are not clearly defined. If one party contributes the largest share of the business capital, they are bound to suspect the other party’s commitment to the business relationship.

Further, as time progresses, one partner may no longer wish to devote 45 hours a week to the business. They instead choose to spend more time with their family. This normal life transition doesn’t have to be a problem, but it can be a grave matter if that partner expects the same compensation for a small job.

 Disagreements in strategy and succession planning

The future of the company can raise many complex and challenging questions in business planning. Succession issues are most likely to arise in father-son companies, but they can affect any other business that involves co-owners.

One partner may wish to bring in a third partner, but the other may not warm up to the idea. Suppose one of the partners is convinced that the business lacks something important – financial risk management or technical skills. In that case, this can turn out to be a business-halting disagreement.

For instance, the opposing party might not see hiring as necessary. They may believe that the need can be met adequately by outsourcing to consultants rather than bringing in a third partner. Until the dispute is resolved, the financials and operations of the business may hang in the balance.

Misuse of partnership assets

Some partners may have a penchant for using business assets as part of their personal finances. Let’s say your trusted partner of many years, out of the blue, uses the company’s credit card to pay off their debts. You might let it go the first time. But what if this continues? Worse, what if you find out they have a gambling habit? A business dispute attorney can help you figure out a plan.

Because in partnerships, when the other party misappropriates company resources, the entire business suffers. Profits will dip, and investors will be on your neck. Personally, you might find yourself in debt as a result.

If your partner doesn’t stop using your business as an extension of his or her personal bank account, you may need to take steps to protect your company. A business dispute attorney can help you understand your options and reach a decision.

Partner behavior

Sometimes the behavior of a person you are in business with can taint the company image and profitability. For instance, if your partner is found to be a felon or is named in the next “college admission scandal,” what would you do? And what if they go bankrupt? These challenging questions are the forte of partnership disputes attorneys. The best legal specialists can help protect your business and personal assets.

If you are worried that your partner’s behavior may be hurting you or starting to affect your business, it is vital to speak to a co-operative attorney right away. They can help you take steps to protect your business.

Breach of contract

Partnership agreements function much like a country’s constitution. They state the expectations of everyone involved and the consequences for failing to meet these expectations. If one party misses making their mandated capital contributions or makes financial decisions without consulting, this may amount to a breach of contract. Remedies may include fines, penalties, or expulsion from the partnership.

How to Avoid Partnership Disputes 

There many ways to avoid conflicts in partnership:

· Set clear defined goals for your business from the get-go

· Establish a written partnership contract with rules, consequences, and expectations

· Adopt a business code of ethics

· Retain counsel or have a regular legal consultant in your phone book

Resolving Partnership Disputes

When a dispute arises in partnership, the appropriate parties may try to resolve the matter privately. However, disputes rarely get successfully resolved without intervention. A business dispute attorney can serve as a mediator.

Sometimes talking is all it takes to get partners on the same page. The arbitration session can help partners to have a personal conversation about business problems. The root cause of the disagreement could be that they may not have had such a meeting in many years.

However, you might need to make a hard choice concerning the future of the business partnership. What would it take to resolve the disputes? Can a breach of trust or breach of contract be resolved?

It is good to try to resolve business partnership disputes out of court. Still, many of the issues involved in a complex partnership may require the courts’ intervention. In this case, a partnership dispute attorney with the right experience can help file and litigate your case.