July 20, 2020
Just as the name might suggest, business partnerships have much in common with personal relationships. Everyone starts out with generally positive feelings in the beginning, but troubles often come along somewhere down the road. Without a strong infrastructure in place, these disputes can spell the end of these once-promising relationships. This blog will cover some issues that commonly arise among business partners.
Breach of fiduciary duty
Just as the Board of Directors has in a corporation, the owners involved in a business partnership have a fiduciary responsibility to always act in the best interest of the entire business (rather than just themselves). A breach of this duty of care might occur when one business partner begins performing work for a competitor or starts misappropriating company funds. Generally, business partners’ not putting the partnership first will constitute a breach of fiduciary duty.
Disagreements over the direction of the company
After a few years, one business partner might think it is time to expand and open a second location of the company. One or more other partners, however, don’t think it is quite time to pull the trigger on expansion. This hypothetical is just one illustration of how business partners might disagree over the next steps of the partnership.
Disputes over workloads among the partners
Nothing can make tempers heat up more than the perception that one business partner is not working as long or hard as the other partners. If there was an understanding that all partners would contribute equally to the business’s operations, then a sure way to dispute is one partner not pulling his or her weight.
This can cover a broad range of disputes; nearly every disagreement among business partners can be traced back to a dispute over money. From one partner not contributing enough capital upfront to disagreements over how much of the company’s profits each partner will receive, these fights often have a way of forcing the dissolution of a partnership. Disagreements over money don’t always occur during difficult times, though. Another example of a financial dispute is when partners cannot agree on the best use of surplus funds; should it be invested in a marketing campaign or product development?
Nearly every partnership dispute can be prevented by having an effective partnership agreement in place. Some disputes become an impasse, though; if you are in this situation, you might be seeking a way to initiate a business divorce. For any legal help setting up your business, settling disputes, or negotiating a smooth exit, get in touch with our business law attorney today. You can reach us by phone at 623-385-3190 or through our website.