Partnership disputes happen when business owners disagree with how to run their business. Unfortunately, if the partners have a dispute, it can be difficult to resolve without guidance from business bylaws.
How Do Partnership Disputes Happen?
When more than one person starts a business together, they legally form a partnership if they do not actively adopt a different business structure, like a corporation or a limited liability partnership (LLP).
When people form a basic partnership, they can discuss what they want to happen in certain events, like if one of the partners wants to leave the business, and write down their agreement. However, most partnerships end up focusing on the day-to-day tasks of building, running, and expanding the business and never have these difficult discussions.
Inevitably, this will create uncertainty and potentially even animosity when the partners disagree with how to move forward. This can happen when partners disagree about:
- One partner wanting to work less
- Business expansion
- Whether to take out a loan to fund further developments
- A partner dies unexpectedly
- How to pay each partner
How Can These Problems Get Resolved?
Even if there is no partnership agreement, it does not mean that there is no law that governs the dispute. Each state has its own default rules for partnerships that settle most of the common arguments that business partners end up having with each other.
However, those rules are often vague or conflict with one another. If enough money rides on the outcome of the dispute, it can lead to costly litigation as each side to the argument hires a lawyer to prove that they are right.
A better solution is often to hire a lawyer at the very start of the business to help craft a business agreement and set of company bylaws that aims to resolve potential disputes before they even happen. This can also provide peace of mind for the partners, as they know from their agreements what will happen.
