You’ve started your business, either with a partner or partners, or have taken on partners to your existing business. Whether true partners, members of a limited liability company, or active shareholders in a corporation, you entered your business “partnership” with the intent to do things as a team, and inevitably a disagreement comes along that challenges the relationship with your partner(s) and, potentially, threatens the business itself. Here are some common causes of disputes in business partnerships:
Financial issues are by far the most common issues business partners face. Managing your business’s finances is key to its long-term success, and disagreements about those finances can lead to serious conflict between business partners. Even seemingly minor disagreements about managing the financial aspects of daily operations can reach a breaking point if your business goes through a period of financial difficulty, or if the partners cannot agree on financial management matters or personal compensation. In other cases, a partner may breach their fiduciary duty to the company through misappropriation of business funds or mixing business and personal funds.
- Disagreements about each partner’s role and responsibilities
Working with a business partner allows you to benefit from each other’s knowledge, skills, experience, and professional network. However, if one partner does not uphold their responsibilities, conflict can arise and the business may suffer.
- Disputes over intellectual property
If your business builds and owns intellectual property, that property becomes an intangible asset that can be particularly valuable. Disagreements over who owns that property and how it should be managed can put that investment in jeopardy.
- Different goals for the company’s future
Finally, if you and your partner(s) do not agree on a common vision for the business’s future, then you may find it difficult to agree on more immediate matters.
Most disputes can be prevented through detailed advance planning, thorough communication, and—most importantly—a carefully drafted and comprehensive partnership, membership, or shareholders agreement that outlines in detail each person’s role and obligations, together with a specific mechanism to resolve disagreements; yet, some disagreements may be inevitable. When these disagreements arise, it is helpful to discuss your options with an experienced business attorney whose guidance can provide insight into the terms of your agreement and offer you the best possible options for dispute resolution.