About Partnership Disputes
Resolving Disagreement Between Colleagues
A partnership is formed when two or more people agree to cooperate to achieve and advance mutual interests. Under this business entity, the structure allows the partners to have a large amount of freedom and an opportunity to earn more profits than if the business was registered as a corporation or a limited liability company (LLC). By agreement, the partners consent to form the partnership and acknowledge that they are personally responsible for any debts the company may face.
Unfortunately, when establishing a business or entering into a joint venture, many partners neglect to create a clear agreement regarding their rights as well as their responsibilities to each other. It is best for this agreement to be made in writing in case any misunderstandings arise about these responsibilities and rights as well as to avoid ambiguities. With thorough written contracts, many cases in business litigation could be prevented. It is unfortunate when small disagreeable matters come in between business partners and cause of a separation or divide in the business venture or even dissolution. Our firm wants to help you settle your differences both quickly and efficiently and protect your interests now and for the future.
Types of Disputes
Whether or not there is a written partnership agreement in place, disputes do occur. Some of the most common disputes arise from such issues as:
- Financial disputes, which can result if both partners have vastly different financial needs. Often, the financial aspects of a partnership are not set clearly, which one partner may take advantage of. The financial realm of a partnership needs to be carefully planned out and managed.
- Debt and profit-sharing disputes, which can arise from many situations. One partner may become unhappy with another partner's input or lack of input into the business and may feel the profits should not be equally divided. Debt can also be a major issue in a business partnership, since many businesses do not make a profit, which can leave questions as to how much debt each partner will absorb.
- Partner exit disputes, which can be caused if one partner wants to leave the business. If they do leave the partnership, how much profit and capital they will take with them may be argued over.
- Other non-partnership related issues, which may influence the partnership, such as marriage problems, personal financial difficulties, or illnesses.
Resolving Business Partnership Disputes
When a serious dispute arises, it may be in the best interest of a business partner to seek legal representation to protect their rights. While a lawsuit and litigation may be unavoidable, in most cases, those routes should only be utilized as a last resort, as litigation among partners who have worked together for many years may be difficult. Litigation options such as alternative dispute resolution (ADR), injunctive relief, and mediation should be explored. It may also be possible to create a business solution by re-drafting the partnership agreement that satisfies both partners in order to have a continued working relationship. If you find yourself in a position where you and your business partner have a dispute and are unable to reach an agreement, you should seek legal counsel to learn what options are available to you.