You wouldn’t have started your business partnership without having a pretty solid relationship with those you’re going into business with. You and your business partner might have known each other since elementary school or otherwise have grown up together.
Even the partnerships that start with the best of feelings, though, are vulnerable to potentially explosive disagreements that threaten the existence of the company itself. Every partnership is different and, by extension, every business partner has a different personality; there are some common threads, though, that give us a clue about common ways that business partners might start feuding.
- Conflicts over decision-making authority. This is a big one. A well-structured and robust partnership agreement can, and should, clearly delineate which business partners have decision-making authority and which ones are merely passive partners. If, say, a partnership has two partners and they disagree on a particular issue, does one of them have final say over the issue? Without an agreement that lays out decision-making authority in every scenario possible, serious disputes can arise.
- Disputes over workload and profit distribution. Almost nothing makes a business partner (or anyone working within a company, frankly) more angry than another partner (or employee) not pulling his or her weight. It’s not uncommon for one or more business partners to simply be passive partners, where they simply contribute capital upfront and receive a portion of the profits. It’s vitally important, though, to unambiguously delineate the amount of hours each partner is expected to devote to the partnership and the percentage of profits generated by the partnership.
- Disagreements over the direction of the company. Starting out, you and your business partner were in total agreement that the partnership’s singular goal is to turn a profit and, eventually, pay a living wage to both of you. A few years go by, though, and you’re getting the feeling that your partner is fine with the way things are. There’s some money in the bank, and you want to invest that so the partnership can grow and scale operations so you can expand the market. The fact that your business partner is not on board to expand horizons could mushroom into a serious dispute.
- Breaches of fiduciary duty. No matter how detailed or in-depth your partnership agreement is, you and your partners have common law obligations to each other. Generally, business partners must always act in the best interests of the business; for example, partners are not permitted to engage in business activities that would directly compete with the partnership. One way that business partners often breach their fiduciary duty is by enriching themselves with business profits.
We Can Help You Resolve Disputes
A thorough partnership agreement cannot completely prevent future disputes among partners, but it can, at least, lay out the procedure for resolving a dispute. If there is no agreement in place, resolving disputes can get vastly more complicated. No matter which situation you are in, an attorney is crucial to help resolve business partnership disputes so the company and reputation can be preserved. We’d be glad to help; call us at 305-227-4030 to see what we can do.
Law Office of Ray Garcia, P.A.
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