Business partners need to work together to develop a thriving organization. If they end up fighting with one another, the company may suffer. Most of the time, business partners can work through their disagreements.
Occasionally, they may end up going to court. Disputes can lead to buyout attempts or even demands for damages. What are the most common sources of partnership disputes?
1. Contract breaches
Partnership agreements help establish the obligations of each partner. If one partner has failed to invest their time or capital as promised, the other partner may take issue with their conduct and could potentially file a lawsuit.
2. Breaches of fiduciary duty
Partners should uphold their obligations to one another and to the business that they started together. They have a duty to act in the company’s best interests. If one partner embezzles or makes incompetent decisions that harm the business, the other partner may choose to take legal action.
3. Changes in plans
Frequently, partners discuss their intentions for the organization before deciding to work with one another. However, either partner could experience changes in their circumstances that force them to reevaluate their priorities. Divorce, personal medical emergencies or the loss of a loved one could lead to one partner changing their priorities and choosing to exit the organization earlier than they intended. They may also want to sell the company or move on to a different business opportunity.
Drafting thorough partnership agreements and adhering to them can help protect people from partnership disputes that damage their organizations. Nevertheless, partners who uphold their obligations to their company and one another must sometimes take legal action in response to misconduct or disputes with a partner.