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2 common reasons business partners wind up fighting in court

| Mar 29, 2021 | Business Law

Becoming business partners with someone means putting a lot of trust in that person. Depending on the language in your partnership agreement and the way that you form your company, you could take on some liability for their decisions or make major investments that could go unreimbursed if your venture proves unsuccessful.

Business partnerships can allow people with different backgrounds and resources to work together for the same purpose. The sad truth is that business partnerships can fall apart for a number of reasons. There are certain partnership disputes that could easily land you in court.

When there are unmet expectations or obligations

If you invested months of unpaid sweat equity into the startup or financed its early development, you likely have expectations for how the business or your partner will pay you back. If you have not included those expectations in your business plan or contract with your partner, they might let you down.

It’s also possible that they have uncommunicated expectations of you that have led to conflict. Being explicit about what role you expect both partners to play in the company and how you will handle compensating each partner for their contributions when you start the business can help you avoid this kind of conflict.

When there are disagreements about business operations

When you started the business, both of you wanted to provide the same service or make the same product. However, now that the business has become successful, you may have differing opinions about what you should do next.

Perhaps one of you wants to expand to new locations or offer new products and services. Maybe one partner wants to sell the business to a competitor or a conglomerate to secure a quick return on the project, while the other wants to keep the business for ongoing revenue.

When you disagree about what you want the business to do or what you want to do with the business, you may find yourselves in a conflict that you can’t resolve outside of court.

How can you resolve business partnership conflicts?

Both of these scenarios are issues that you can address proactively when you create a company or a partnership agreement. Talking about the future, your expectations and your contributions with your partner in-depth will help you limit future conflict.

If you find yourself disagreeing with your partner, you may need to engage in intense negotiations. One of you buying the other out maybe the best solution if you no longer see eye-to-eye about the company, your roles in it or its future.

You may be able to settle the issue outside of court. It’s also possible that you may have no choice but to litigate the dispute if neither of you feels satisfied with compromising.