It takes years of effort and dedication to build a successful business. It is easier when you have a partner with the same enthusiasm for an idea. But, as time goes by, disagreements arise, and many business partnerships end in disputes.

Some disputes can be prevented, while others may involve the law to dissolve the partnership. In times like this, a business dispute advisory service can make a significant difference in ending things on good terms. Here are five common reasons for business partnership disputes, where a business dispute attorney can intervene to help.

Breach of Fiduciary Duty

When two parties form a partnership, they agree on several aspects, the most important being agreeing to act only in the business’s best interest. If one of the parties puts their best interest over the interest of the partnership or Limited Liability Company, they are in breach of their fiduciary duty.

The partners have a fiduciary duty of care, loyalty, and good faith toward the business. Failing to do so can and will result in a business partnership dispute. There are several ways they can breach their fiduciary duty: misusing the company’s funds, theft of company assets, wasting resources, acting in a manner that leads to losses, and going against the company for personal gain.

Workload Distribution

There are different kinds of partnerships. A partner who only provides funds as an investment and provides financial support is known as a silent partner. In other cases, operations and responsibilities of executing daily tasks are divided equally among partners. They are also involved in business operations.

Conflicts arise when one or more partners feel the work is not reasonably divided, leading to a business partnership dispute. 

Allocation of Profits and Benefits

A partnership agreement also includes the details of the distribution of profits and benefits. It needs to outline how benefits will be distributed and how much profits will be reinvested. The finances of a business are the most common area where most disputes arise.

A well-formed and articulated partnership agreement will have detailed metrics and strategies for investments and compensation distribution in advance to avoid confusion or conflicts. 

Disclosure of Confidential Information

When an agreement is formed, a large chunk focuses on keeping trade secrets and customer information that could result in the loss of business confidential and well-protected. Every partner must agree to uphold the responsibility of protecting confidential information.

If a partner intentionally discloses such crucial data without authorization, it will cause a loss of business. It will lead to a business partnership dispute and is a firm ground for a lawsuit.

Failure to Delineate Authority

While drafting a contract, both parties must define roles and responsibilities. These roles include which partner will be responsible for deciding on the use of resources and which partner will be responsible for communicating with clients and other business operation decisions. When a partnership agreement doesn’t define these roles clearly, it often leads to disagreement and creates business partnership disputes.

Hiring a Business Dispute Attorney

If a business partnership dispute arises, one should contact a business dispute attorney. They have the experience and expertise to handle such situations. Thus, they can help you avoid any monetary or business loss. Whether drafting a partnership agreement or encountering a conflict with your partner, the best business dispute attorney will guide you to the best possible outcome. 

Conclusion

You can prevent business partnership disputes by creating a well-detailed agreement that outlines the roles of each partner in explicit detail. But some disputes are inevitable when there is a lack of responsibility, honesty, and good faith. In those cases, hiring a business dispute attorney is the right step for litigation or partnership dissolution.

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General Knowledge, Other,

Last Update: April 29, 2023