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Common causes of disputes between business partners

On Behalf of | Feb 9, 2024 | Business & Commercial Law

A business partnership can be a very positive dynamic for a company. Each partner can utilize their strengths and compensate for any weaknesses. With that being said, a business partnership needs to be maintained, and disputes can arise.

A partnership dispute can quickly send the company into disarray, so it’s important to try and prevent these, or at least settle them quickly. What are some of the more common causes of disputes between business partners?

Failure to delineate responsibilities

The most successful partnerships tend to be complementary. One partner may have excellent communication skills and can employ a motivational approach with team members. The other partner may be innovative in terms of technology and new business ideas. It’s important that these skills are utilized appropriately and that there is a clear delineation of responsibilities. If one partner feels like their workload is too high, this can cause disputes. Having a partnership agreement in place with clear terms on responsibilities is one of the best ways to prevent this type of dispute.

Breach of fiduciary duties

Business partners are fiduciaries. In short, this means that they must always act in the best interests of the company. Money should be reinvested back into the company appropriately and neither partner should misappropriate funds for personal gain. Where company resources are misused, this could be a breach of fiduciary duty, which is a common source of partnership disputes.

A partnership agreement is a binding contract that can limit disputes. It can also include terms on how to resolve conflicts if they do occur. To prevent or resolve partnership disputes, it will benefit you to have as much legal information as possible.