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4 common causes of business partnership disputes

On Behalf of | May 23, 2023 | Business Litigation |

Business partners (ideally) share their efforts and their resources to help build a functional and profitable company. In a two-partner firm, both business partners directly benefit from successful company operations and both of them might suffer if there were issues with the company.

Disputes between business partners can affect the culture at a company and could eventually lead to the organization’s dissolution. Those who recognize the common causes of partnership disputes can better prepare themselves for the realities of joint business ownership and avoid escalating conflicts that could harm their organization. These are some of the most common causes of partnership disputes.

1. Embezzlement of company resources

Business owners sometimes feel a sense of entitlement to the physical resources of the business or the funds the company generates. Even though a partnership agreement should have very clear rules outlining how the company owns that property and how the partners should share in the profits the business generates, one partner might take what does not belong to them.

2. An early desire to exit

Sometimes, one partner wants to leave the company while the other still depends on their capital or their personal expertise to help the company succeed or reach crucial goals. When one partner wants to leave the business before the company has become fully established, the other may try to prevent their exit.

3. Disagreements about staffing

Bringing in additional people to work at an organization will inevitably change the dynamic experienced by the existing workers. Partners often disagree about how many people to hire, what to pay and what responsibilities to delegate to them. Additionally, hiring often leads to nepotism, which might mean that people filling key roles at the company don’t really have the skills necessary to perform their jobs properly. Those entering a business partnership could protect themselves from common disputes by having conflict resolution clauses in their agreements with one another and establishing clear expectations for one another.

4. A slump in performance

When one partner doesn’t seem to want to work the long hours they did before or refuses to commit as much time and effort as their partner, resentment can quickly start to develop. Especially if such behavior constitutes a violation of someone’s agreement with their partner, a change in their schedule and/or performance could also mean a major change in their relationship.

Avoiding and properly handling business partner disputes by seeking legal guidance could prove to be crucial for those invested in and operating an organization.