Running a successful business requires a keen eye for market need, and sharp ability to negotiate favorable contracts, and the wherewithal to secure top talent. Yet, none of these abilities can exist without trust and communication with both internal and external parties. Far too often, though, trust is broken and miscommunication throws an otherwise steady business operation into disarray. These issues can even lead to litigation.
This is often seen in the context of partnership disputes. While a partnership business structure has many benefits, it requires the partners to work cooperatively and collaboratively together, and that working relationship needs to be built upon trust. If you’re seeing any of these issues in your partnership, then it might be time to consider whether legal action is in your and your business’s best interest.
Following are some of the common partnership disputes:
- Breach of fiduciary duty: Breach of fiduciary duty is probably the most severe partnership issue you can face. Each partner in the business is tasked with putting the business’s financial interests first, but far too often partners are tempted by easy access to the business’s resources. This can lead to a misappropriation of business funds, the partner creating conflicts of interests by trying to siphon off clients for his or her own business venture, or the partner otherwise acting in a way that is contrary to the business’s best interest.
- Lack of clear authority: In order for a partnership, or any other business, to be successful, management roles need to be clearly defined. If they’re not, then partners might end up performing duplicative work. This stymies efficiency and can lead to major frustrations. To avoid this, you simply need to have clear employment contracts and partnership agreements.
- Lopsided work distribution: Again, clarity is key here. If the division of work seems improvised, then disagreements are sure to arise. You can probably head off this issue by clearly identifying work responsibilities and obligations in an employment contract or partnership agreement.
- Disagreement over how business resources should be used: Hopefully you can avoid this issue by specifying in your partnership agreement how the business’s resources are to be used and who has the power to make decisions regarding how those assets are to be used. If not, then you’re probably headed into a conflict that may need to be resolved in a more formal fashion.
- Issues pertaining to buyouts: If a partner wants to leave the firm, then he or she may want to be bought out, thereby ensuring that he or she is compensated for his or her share of the business. This particular matter can be addressed in a partnership agreement, but if it’s not then a separate buyout agreement may need to be negotiated and drafted. This might also hold true if a partner is essentially being forced out of the company.
These are just a handful of the issues a partnership can face. Those who are considering creating a partnership should be sure to put in the thoughtful preparation that is necessary on the front end to avoid some of these matters. In other instances, though, such as with a breach of fiduciary duty, you might need to take independent legal action to recoup your and your business’s losses from the partner who took advantage of his or her position.
Regardless of your situation, the chances are pretty good that you could benefit from some legal assistance. Don’t feel compelled to address these matters on your own. In fact, doing so could lead to outcomes that are devastating for your business. So, if you think you want to learn more about how to address your partnership issue, or avoid it in the first place, then you might want to speak to an attorney who is a good match for you and your business.