Business Relationships Can Be Challenging to Navigate

We’ve all been there with family members where disputes or challenges occur, leaving us distant or confused and trying to navigate the relationship. Partnership disputes can arise for many of those same reasons but can bring about much more challenging outcomes due to the business aspect of the partnership.

By working with an experienced attorney, you can ensure that partnership disputes are navigated in a way that doesn’t jeopardize your or your business’s future.

Authority Disputes

Partners have fewer authority disputes when a business is adequately structured, as roles are defined and clear for all relevant parties. Partnership disputes can quickly arise if there are gray areas within the authority structure.

Clearly defined written contracts can allow for fewer disputes as the business grows and evolves. Each party can have clearly defined responsibilities and obligations, leaving less room for conflict or questions.

It’s important to realize that when creating clearly defined roles, you must anticipate the future of the business and how it may grow and change so you can continue to rely on the structure that was outlined in the beginning or allow for changes to be made as necessary to protect all parties involved.

Breach of Fiduciary Duty

What is fiduciary duty? According to Colorado law, “a fiduciary relationship exists whenever one person is entrusted to act for the benefit or interests of another and has the legal power (authority) to do so.” In business partnerships, each party has the fiduciary responsibility to act in the business’s best interest and carry themselves and their actions accordingly. 

If one or the other party breaches this fiduciary responsibility, partnerships can be jeopardized, and significant disputes can occur. It’s important to establish each party’s role and what is expected of them to avoid fiduciary conflicts; however, fiduciary responsibilities are implied in many cases, too.

For example, it doesn’t need to be in a contract somewhere that either party refrains from using business money for personal use or that putting the business at financial risk due to personal choices doesn’t need to be stipulated in contracts when that is implied.

Confidential Information

All businesses have essential information that must be kept confidential so as not to put the company and its success at risk. This information is typically referred to as trade secrets or intellectual property. It could be a specific recipe, a unique way of creating a product, customer/manufacturer information, and more, and if it’s not held privately, it could damage the business’s success.

If one of the partners breaches this confidential trust, the company could lose its standing against the competitors, putting the company at risk of losing business. For this reason, confidential information breaches are often a source of partnership disputes.

Unbalanced Workloads

If both partners work together and have a balanced workload, this is ideal and is what most parties expect. However, if both parties were once invested and working hard for the business and suddenly change and are less present or invested, leaving the other to pick up the pieces, this may result in partnership disputes.

Unless the business partner is deemed a silent partner initially, both parties should have expectations clearly defined for the amount of time and effort invested into the business to allow for less confusion or questions.

Expectations can be clearly laid out in well-written contracts or agreements to help diffuse or avoid disputes in the future.

Financial Agreements

Many business partners find themselves trying to determine what profits should be used for. Some will want to reinvest the money back into the company. Some will want to spend the money to care for their family or reward themselves for hard work.

It’s crucial to have financial information drawn out and clearly defined in a contract so that both parties are on the same page. Suppose a percentage should be used to reinvest back into the business vs. another percentage of profit that either party can use for salary or other means. In that case, this should be stipulated in contracts and amended as the company grows or when necessary.

Communication is Key

As with any relationship, communication is crucial to a successful business partnership. Suppose both parties are open and honest about their business practices, decisions, roles, financial matters, and more. In that case, both parties can successfully work together to grow and maintain the business.

If one of the partners consistently isn’t communicating regarding significant decisions or other information, this can quickly result in partnership disputes. Account for clear communication through well-defined contacts and agreements in the beginning, so as things change, all parties still know where they stand regardless of the success or failures of the business.

How Can Business Attorneys Help Me Avoid Partnership Disputes?

Contracts are crucial in building successful business partnerships. Working with an experienced attorney can ensure that you have a bulletproof contract and can review it as often as needed to account for changes in your goals or business structure.

Trade secrets and intellectual property can be adequately protected to ensure your business remains successful and void of outside issues with competitors learning what makes your business profitable.

Furthermore, suppose you are in the beginning stages and want to ensure that your business is structured for success. In that case, attorneys can help with business structure questions and proceed with all necessary contracts.

Contact our office today at (303) 557-2011 to schedule a consultation and learn how our team can best assist you.