Your Guide to Understanding Partnership Disputes
In the business world, it is an extremely common practice to establish partnerships with other parties. While business partnerships are often created to mutually benefit both partners, conflicts and disagreements may arise when dealing with fundamental issues. Though most partnerships anticipate disagreement and prepare provisions beforehand, serious disagreements can lead to the lengthy process of business litigation. If you find yourself in a partnership dispute with another party, enlisting in the aid of an experienced business attorney can help save your partnership and allow your conflict to be resolved as amicably as possible.Common Causes for Partnership Disputes
Regardless of the situation, conflicts between two parties can arise for any reason. However, in business settings, the stakes are often higher which may lead to serious disagreements between two parties. The most common causes for partnership disputes include but are not limited to:
- Breach of Fiduciary Duty: When an individual owes fiduciary duty to another individual or entity, they have the responsibility to act in a loyal and selfless manner. Legally, they are contractually obligated to make decisions that are in the best interest of the beneficiary. When this relationship of trust is broken, however, serious disputes may arise between the two parties. This can ultimately lead to a significant partnership dispute that may come with costly litigation and possibly even dissolution of a company.
- White Collar Crimes: When a partner commits white collar crimes such as tax fraud, securities fraud, or embezzlement, serious disputes between the parties may arise. Not will the trust and respect in the business partnership be compromised, but the individual who committed the crime can face legal repercussions as well.
- Differing Visions: When two partners in a business have differing visions for the company, it is inevitable for disagreements to occur. While it is customary to talk out these disagreements, occasionally, the parties may refuse to make a settlement. In these situations, partnership disputes may become serious enough that litigation is required.
Partnership disputes are not completely unpreventable. If you and your partner take considerable measures beforehand, you may be able to protect your business relationship from significant conflict. Steps you can take to avoid serious partnership disputes include:
- Establishing a written agreement beforehand - In this written agreement, specifications such as roles of authority, duties, obligations, capital contributions, and termination circumstances should be outlined.
- Thorough discussions in time of disagreements - Communication is key in disputes. When experiencing a conflict with your partner, you may be able to resolve the issue through communication. Litigation does not always have to be the first step.
- Going through mediation as an alternative to litigation - Mediation is a process that includes discussion with a neutral third party. Business litigation can help you and your partner come to an agreement if you do not wish to go to trial but cannot come up with a solution on your own.
When running a business with another party, it is central to hold each other accountable and have a collective vision. If not, it is likely that business disputes within partnerships may occur. When all alternatives to litigation fail and two parties are unable to make a compromise in their dispute, a business litigation lawyer may be needed. If you are currently in the middle of a partnership dispute, an experienced attorney can help you come up with a pragmatic resolution. At SAC Attorneys LLP, we understand how much is at stake when you are running a business. To discuss the options you have in your partnership dispute, please do not hesitate to contact us at (408) 441-7500 or through our website today.