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Common Causes of Partnership Disputes

People rarely enter into a business partnership expecting a conflict to arise, but unfortunately, disputes between business partners are all too common. From disagreements about the growth of the business to concerns about illegal activity, the causes of partnership disputes are myriad.

Without a firm partnership agreement that addresses the assignment of responsibilities, financial obligations, and the procedure to address concerns and disputes, business partners may find themselves in a lengthy and costly court battle to solve their issues – and at the detriment of their business. 

An experienced business attorney will help ensure that you and your partners are protected when one of these common problems arises.

What are common causes of partnership disputes?

Ultimately, business disputes boil down to differences of opinion about overall responsibility for the operation and growth of the business and typically revolve around money. 

While some business partnership conflicts are simply personality clashes, the most common causes are described below.

Fraudulent Activity or Misappropriation of Funds

Misappropriation of funds is legally defined as “the unauthorized, improper, or unlawful use of funds or other property for purposes other than that for which intended.” It usually refers to cases where the offending party had some responsibility for the funds in question, such as a CFO or a company’s accounting partner.

Fraudulent activity is similar to the misappropriation of funds and can cover embezzlement, forgery, and fraudulent financial reporting. Comingling personal and business funds is another common reason for business partnership disputes if one partner uses business monies or other business assets for personal use.

Breach of or Interference with a Contract

Breach of contract or interfering with a contract involves one party failing to fulfill the terms of the promises in the agreement. For business partners, it can also include interfering with another party’s ability to complete the contract terms. 

Disputes in these cases can cover anything from vendor relationships to failure to uphold the terms of a business deal.

Opposing Visions for the Direction of Company Growth

Many partnerships start out with one business vision in mind, but as the company grows, disputes can arise when one partner wants to expand and the other doesn’t. 

Or perhaps one partner wants to diversify the goods and services of the company, while the other wishes to continue offering only the initial ones. When partners can’t agree on the direction of the business, it often leads to dissolution or one partner buying the other one out.

Lack of Business Succession Plans

A business succession plan is integral to a good partnership agreement. Succession plans address how to handle the division of assets if one partner wants to retire or if one party wants to buy the other one out. Having a plan in place to allocate assets when one party wants to change their business arrangement can help you avoid costly litigation.

If you find yourself embroiled in one of these disputes, you need the help of an experienced business attorney to protect your interests.

Options for Resolving Business Conflicts

Common ways to resolve business partnership disputes include:

  • Mediation
  • Right to an accounting
  • Dissolution of the business
  • Lawsuits and countersuits

Without a firm partnership agreement that spells out how to address each concern, business partners may face a lengthy process in resolving a dispute. 

Do you need help resolving a business partnership dispute?

Business partnership disputes can turn messy, especially without proper legal counsel. Resolving your business dispute may take time, and while you and your partner are seeking a mutual arrangement, your business can suffer.

If you have a problem with a business partner or suspect suspicious financial activity, you need an experienced business attorney to protect your interests and possibly keep you from facing charges. Call the Law Offices of William M. Kolb today to discuss your case!