Running a business is no easy task. Many entrepreneurs reach out to investors, friends and colleagues for partnership opportunities, starting or growing a business together. Though partners may prioritize equality and respect, they may still experience disagreements that could lead to disputes.
Understanding the most common disputes between business partners can help entrepreneurs work together, overcome their differences to find helpful and profitable solutions.
5 common partnership disputes
Sometimes, partnership disagreements can turn into legal disputes. Partnership disagreements most often concern one of the following areas:
- Financial rights and obligations: When the business experiences financial difficulties, it is important to establish each partner’s responsibility for recovery. Partnership agreements should cover financial contingencies and outline each party’s responsibilities.
- Decision-making: Some partners may dispute their authority in certain business matters. Many agreements delineate responsibilities, but business partners might disagree over decisions even in these cases. Clear instructions in partnership agreements can help eliminate this ambiguity.
- What to do with profits: Many business disputes arise over how to spend company profits. Partners often disagree about how to reinvest in the business. Calm discussion toward compromise can help.
- Workloads: Partners may disagree over how much work they individually take on. Partners may believe their workload is unfair in comparison to the other. This perceived inequality can put undue strain on the relationship, creating division and even resentment.
- Company goals: Disagreements over the company’s future can inspire disputes between partners. One partner may want to expand into a new market, while the other wishes to focus on community reputation. Sometimes, these disagreements lead to splitting the company in two, turning former partners into new competitors.
Several paths to dispute resolution
Regardless of the issue, not all partnership disputes end up in the courtroom. Before filing a legal complaint against a partner, concerned entrepreneurs can contact a local lawyer familiar with resolving business disputes. An attorney can help explore options that preserve the business partnership and the relationship.