WHAT IS A PARTNERSHIP DISPUTE?
Starting a business on your own can be a very daunting task, so partnering with a friend or colleague can help relieve a lot of stress. After all, two minds think better than one. However, what happens when those two minds are thinking on completely different pages? This is when a partnership dispute occurs. A partnership dispute is a disagreement between partners who own a business together. Though partnership disputes are not uncommon, they can be very damaging to both the short and long-term success of the partners’ business, so it is important to be aware of the most common reasons for partnership disputes and how they can be avoided.
WHAT ARE THE MOST COMMON REASONS FOR PARTNERSHIP DISPUTES?
- Failure to act in the business’s best interests: Upon the establishment of a business, all partners agree to honor their fiduciary duty. Fiduciary duty simply means that one must act in the best interests of another person or entity, which, in this case, is the business. Some common breaches of fiduciary duty that often end in dispute include:
- Misappropriation of money
- Withholding of information
- Misuse of position
- Misrepresentation
- Fraud
- Failure to agree on the issue of resource allocation: The owners of a business are faced with the difficult task of resource allocation. These resources include but are not limited to: machinery, technology, real estate, labor, natural resources, and financial resources. Obviously, this is an extensive list, so the opportunity for dispute is large.
- Failure to define each partner’s responsibilities: In a partnership, it is essential not only to define the individual responsibilities of each partner but also to keep each partner’s responsibilities separate. Without this separation, conflict will certainly arise as the partners attempt to manage overlapping issues.
- Failure to distribute fair work loads: A business partnership implies that all partners play an equal role in the functioning of a business whether that be an active role in the operations of the business or a silent role as the financial investor of the business. Regardless of the role, each partner must contribute an equal amount of work to the success of the business. However, if one partner deems the workload to be unfairly distributed, then conflict may ensue.