Introduction to Partnership Disputes
Sometimes the greatest threat to your business is not your competitors, but rather a dispute with your business partners. Common causes of partnership disputes are:
- A breach of fiduciary duty. Partners have a duty to act in the best interests of the business. They should not misappropriate company funds, they should not take business that ought to belong to the company to benefit them personally, and they should not otherwise do anything that would harm the interests of the partnership. If a partner acts inappropriately and hurts the business, this is a serious dispute that can sometimes result in litigation and that could sometimes set the stage for the end of the partnership.
- Disputes over how resources should be used. Often, there is conflict regarding whether financial resources should be used for a specific purpose such as buying new equipment. Hopefully, a partnership agreement details who will have authority over the particular decision or what process should be used to make the decision. However, if authority is not clearly delegated and partners have to decide together, it could be difficult to resolve the conflict when they hold opposing positions on the issue of resource allocation.
- A failure to delineate authority. If there is not a clear separation of responsibility among the partners, it is inevitable that conflict will arise frequently as both partners try to work on overlapping issues. Using partnership and employment agreements, all partners should make certain that they understand both their rights and their obligations within company operations.
- A failure to fairly distribute work loads. In some partnerships, only some of the partners work and others just provide the funds and are considered silent partners who made only a financial investment. In other situations, partners will divide up work that needs to be done and will all be involved in operating the business. Unfortunately, if any of the partners believe that the workload is not being distributed fairly when they are operating a business together, this can result in conflict arising.
- Divorce and Probate Disputes.
- The Exclusion of a Partner from the Business.
If you are experiencing a dispute with a business partner that is escalating and affecting your business operations, contact our office today at (513) 621-4999 to arrange for a consultation, or contact Alex Durst on his direct line at (513) 621-2500.