Having a smooth business partnership is imperative to the success of any business venture. In any case, you may experience partnership disputes that threaten your rights and interests. While legal action tends to be the last step most people want to take, it may be necessary depending on the severity of the disagreement.

What are the Most Common Partnership Disputes?

You Disagree Over How to Use Business Resources

You and your business partner may not agree on how to invest your funds or on how one of you may be spending the money. You may want to put money towards different business endeavors or different purposes. These disagreements can often be solved through non-legal means, but if the conflict grows, it may be time for legal action before it’s too late.

One Partner Breaches Their Fiduciary Duty

A fiduciary duty refers to the obligation each partner has to act in good faith and honesty for the best interest of their business. This means they should not misuse business funds or resources, take business away from the company for their own personal gain, or harm the interests of the joint venture. When one partner acts dishonestly and negatively affects the business, this could be cause for legal action.

You Disagree Over Decision-Making Powers

If you and your partner did not clearly define roles and decision-making duties initially, there may be some overlap in your responsibilities that can lead to heated conflict down the line. While there are certainly decisions you will make together, it is much more helpful to formally delineate who has the final say in other important matters.

3 Ways to Solve Disputes

#1: Negotiation

This is usually the most intuitive step to take. Before taking any formal legal action, make an effort to discuss the situation with your partner in a calm, controlled manner. If you are both willing to compromise and come to a mutually beneficial agreement, the conflict tends to end there. Sometimes it’s a good idea to use lawyers and take away the inevitable emotional factors that creep into these disputes.

#2: Mediation

If negotiation does not work, mediation through an independent third party tends to be the next best step. Mediators are trained in conflict resolution and can help you both come to an agreement without bias toward either side. Mediation early on is also much less costly than going through litigation.

#3: Litigation

What happens if negotiation and mediation do not work, and you do not have a well-drafted operating agreement with your partner? If the conflict is severe enough, you may need to take legal action and hire a lawyer to protect your rights and interests.

The #1 Way to Prevent Partnership Disputes

The best way to mitigate potential partnership disputes is to hire an experienced lawyer to draft operating or partnership agreements from the start. Discussing how you will both manage certain situations upfront will save you from a lot of headaches and from spending your hard-earned money in litigation. Your agreement should clearly outline:

  • Legal and financial rights and responsibilities
  • A clear process for resolving disputes
  • A means to dissolve the partnership if needed

Even if you are collaborating with a relative or friend you trust, you shouldn’t step into any business partnership unprotected. Call Saltiel Law Group at 305-735-6565 to draft a business agreement that guards you from unexpected conflicts down the line.

Need help solving present difficulties? Our lawyers are experienced in mediation and litigation.