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3 issues that can lead to business-destroying partnership disputes

On Behalf of | Jul 28, 2021 | Business Law

A business partnership is one of the most important professional relationships you may ever have. Unfortunately, many business partnerships go the way of romantic relationships and terminate in acrimonious, sometimes traumatic breakups.

Just like people don’t go into a marriage expecting to get divorced, people don’t start a business partnership with the expectation that they will have to dissolve the partnership. There are certain issues that you can try to avoid that might put unnecessary strain on your business partnership.

Disagreements about the responsibilities of each partner

Before either of you commit your time, money or other resources to a business, you need to have a written partnership contract. Your contract should outline what each of you will do or provide for the company.

If you don’t actually discuss and spell out the responsibilities and expectations of each partner, you could easily clash over unmet expectations and the resulting sense of disappointment they create. The more thorough and honest you are while drafting a partnership agreement, the easier it will be for you to know what to expect and how to resolve conflicts in the future.

One business partner engaging in fraud or breaching the contract

One of the most common reasons for people to get into contentious partnership disputes relates to the behavior of business partners after they sign an agreement. When one business partner doesn’t fulfill their obligations, resentment can grow to a point where it impedes the relationship.

It may also be possible that your business partner engages in some kind of fraud that affects you, the company or its customers. They may have lied to you about what they intended to contribute to the company or their employment history and skills. These actions could create serious legal risks.

Failing to talk about the end of the partnership at the start

If you only talk about the near future when discussing your business with your partner, you may eventually disagree about the necessary steps for your company.

For example, if you intend to retire by the age of 65 and will want to have your partner buy you out or to sell the company at that point, it’s important to disclose that expectation early in the relationship. Otherwise, you could wind up battling each other and depleting your company’s assets.

Partnership disputes can sometimes get resolved amicably. Other times, they may require the dissolution of the partnership or even the sale of the business. Planning ahead to avoid partnership disputes will protect the investment you make in your new company.