What is a Partnership Dispute and How Do They Typically Occur?

While business partners can help facilitate wild success in your lives, they can also become an issue when disagreements or poor behavior arise. Anything from when a partner wishes to move on from the business to disputes regarding how profits are used or how the business should be run in general can lead to partnership disputes.

Though there are myriad ways to help settle these disputes, such as mediation or negotiations, litigation is sometimes necessary. The percentage of business relationships that fail far exceeds the number of marriages that fail. With that said, it’s essential to understand how to protect yourself should you end up in a dispute and ways to structure your business to avoid partnership disputes in the first place.

Asset Protection

One of the most important things you can do in business is to protect your assets at all costs. By structuring your business appropriately, you can help avoid losing your assets through a dispute or lawsuit. Discuss with your experienced attorney to determine if you have an appropriate level of asset protection in place and that your business is structured in a way that provides protection when necessary.

For example, protecting your assets from your business partner, from creditors, or from lawsuits can mean the difference between your business and hard work failing or continuing to stay afloat. Your partner could create liability exposure through their actions or simply be stealing from you and the business, continuing to reinforce the need to protect your assets at all costs.

Clearly Defined Roles

Another way to protect yourself and your business is to establish clearly defined roles within the business. Who will handle what, and how will you handle adversity or disagreements moving forward?

Contracts such as confidentiality agreements, operating agreements, and more can also help establish clarity and what’s expected from all relevant parties.

Confidentiality agreements can stipulate what information is confidential, and therefore, the person who shares that information would be in breach of contract. Every business has information they would want kept safe and out of the hands of their competitors. An excellent way to ensure intellectual property and critical aspects of the business are protected is by creating well-planned agreements.

Operating agreements can also help determine roles and expectations for all relevant parties. Titles, responsibilities, and conflict resolution can be stipulated within to clarify what’s expected to avoid unnecessary disputes and allow the business to thrive even when issues arise.

Other contracts or agreements that can be made deal specifically with how investors will be handled if brought in, any transfer of ownership in the future, expected contributions from each partner, and more. It never hurts to be overly thorough, even in the face of an expected successful relationship, because business partnerships can become complicated fast.

Mitigating Losses

Mitigating losses is another way to help provide protection in your partnership. Ensuring the business has a comprehensive insurance policy to offer protection is a significant and necessary step in almost any business.

Monitoring capital to ensure you have enough reserves as a financial safety net if liabilities occur is another critical step to enforce within your business.

Don’t leave your business and hard work susceptible to financial ruin by not protecting it. Review what plans to implement and create an effective safety net for you, your partner, and the business.

Breach of Fiduciary Duty

When there is a high level of trust required, such as in a business partnership, a fiduciary duty is present. Each partner has a fiduciary responsibility to act in the best interest of each other and the entity. When this is breached, it may be due to misappropriation of funds, fraud, stealing, and more.

Acting in your own best interest rather than that of the business or its partners can quickly lead to litigation regarding the fiduciary breach. Protect yourself and your business by being extremely thorough and documenting everything that you expect each partner to do or not do and how to resolve conflicts.

Get Ahead of Disputes Early

If you are dealing with a stubborn business partner, it’s essential to recognize it early on and attempt to resolve it. Whether through mediation or negotiations, act swiftly to mitigate the risk of the dispute creating havoc in your business.

Seek legal guidance to establish the need for negotiations or resolution rather than handling disputes yourself if there is a destructive pattern. By acting early, you can help avoid unnecessary issues such as the dissolution of your business or significant litigation costs in the future.

Review your contracts and documents often to ensure that they are still relevant and have accommodated any changes that occurred since they were created. By doing so, you can ensure you are not overlooking something that could lead to a dispute and protect yourself.

Let Us Help To Protect You and Your Business

You don’t have to navigate challenging business disputes alone. Arm yourself with competent and experienced legal protection. We offer our clients skilled and determined assistance through negotiations, legal documents for partnerships, structuring your business accurately, and fierce litigation when necessary.

We offer services in multiple areas and use our years of combined experience and legal education to ensure our clients are protected and thriving even in the face of adversity.

Contact our office at (303) 557-2011 immediately if you have questions regarding partnership disputes. The faster you get ahead of the issue, the better, as you can form a winning strategy and avoid unnecessary financial hardship.