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Partnership disputes: Causes and remedies

On Behalf of | Feb 13, 2024 | Shareholder And Partnership Disputes

Partnership disputes are inevitable when an entrepreneur aims to run a business with one or more partners. These conflicts can stem from various sources, such as disagreements over the company’s direction, financial management issues or breaches of a partnership agreement.

The impact of these disputes can range from minor disagreements to significant issues that threaten the stability and future of the business. Understanding the common causes of partnership disputes and knowing how to effectively resolve conflicts when they arise are crucial for maintaining a healthy business relationship and ensuring the company’s longevity.

Causes of partnership disputes

One of the primary causes of partnership disputes is a difference in vision for the company’s future. When partners have opposing views about the business’s direction, it can lead to friction and conflict.

Compounding this issue is miscommunication, which can escalate disagreements and hinder finding common ground. To prevent such disputes, it’s essential to align the company’s goals, strategies, and operations. Ideally, these terms are in the partnership agreement or the business plan.

Financial disagreements are another common trigger for partnership disputes. This can include conflicts over budget allocations, investment decisions or the distribution of profits and losses.

Breaches of the partnership agreement can significantly erode trust between partners and lead to disputes. This may include oversight or intentional actions that should be handled immediately.

Resolving disputes when they occur

When disputes occur, it’s essential to address them promptly and constructively. The partnership agreement should be the first point of reference to determine the agreed-upon mechanisms for dispute resolution.

Any discussions about the disagreement should be handled privately, away from the employees. Employees who discover disputes between owners may feel the business is unstable. This could get out to others, eventually leading to clients and customers knowing about the issues.

If these measures are unsuccessful, seeking legal assistance may be necessary to explore further options, including litigation, mediation or arbitration. Depending on the circumstances in question, some of these methods can effectively resolve conflicts amicably, preserving the business relationship and minimizing potential harm to the company.