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The Common Causes of Partnership Disputes

Business partnerships are complex and can have their fair share of ups and downs. No matter how strong your relationship is with your business partner, disputes can still arise at some point during the company lifecycle. Unresolved partnership disputes can lead to missed business opportunities, low profits, decreased job satisfaction, and even failure of the business. At Robert Wood and Associates, we are home to a team of experienced business solicitors in Melbourne. If you are in partnership, it’s important to understand the most common causes of partnership disputes, so you’re in a better position to avoid them.

Financial Disagreements

One of the top causes of partnership disputes is disagreement about financial rights and obligations. Generally arising when the company is going through hard financial times, arguments about money can also arise even when the business is going well. If there is no clarity about how liabilities will be handled and profits will be shared, a substantial dispute is likely to result. One partner may accuse another of not doing enough to support the business or there may be disagreements over the distribution of profits and liabilities.

Unclear Definition of Roles and Responsibilities

Even though partners may share in the vision of success for a business, they may not do enough to define who needs to do what in order to achieve these goals. When there is a lack of clearly established roles and authority, essential tasks may not be completed, or you have a situation where partners may not don’t respect each other’s areas of expertise and overstep their boundaries. The best solution is to establish a set of responsibilities for each partner, define a chain-of-command and set different areas of authority.

Uneven Workload

The point of having a partnership is to have equal division of responsibilities to sustain a business. If profits are distributed equally between partners, then it is only fair that each partner has a similar workload. If one partner is constantly bearing a larger portion of the workload, it is almost certain that the relationship will be strained overtime.

Different Philosophies, Goals and Objectives

Partnership disputes commonly occur due to different strategies, goals and visions by partners. This is especially true when it comes to company culture, branding and growth objectives. For example, one partner may want to expand the business in a different location while the other may not want to expand so soon. If partners continually disagree on what direction their business should take, it can cause division and tension between partners and even split the company into two.

Breach of Fiduciary Duty

Partners are obligated to act in the best interests of the company, to the exclusion of other entities and their own personal interests. A partnership dispute may arise over breach of fiduciary duty, where one partner diverts opportunities away from the business, misappropriates funds, or otherwise harms the organization

Proper planning, agreements, and mutual understanding are the best way avoid any sort of partnership disputes. If a dispute does arise, it’s best to seek the advice of an experienced business solicitor before matters get worse. At Robert Wood and Associates, our skilled business solicitors in Melbourne can advise you on internal disagreements, and help you avoid costly litigation that can disrupt your company. We’re experienced in working with stakeholders who can’t see eye-to-eye to find fair outcomes for all parties involved. To learn more about our business law services, call us on (03) 9762 3877 or contact us online to set up a consultation.