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What is the leading cause of partnership disputes?

Partnerships are among the simplest corporate structures to initiate and often are necessary because one person may not have the resources to launch a business independently. However, because it is so simple, there is often a lack of structure between duties which can cause tension between partners. That tension can have some nasty side effects.

What happens when partners fight?

When partners fight, there are likely only two outcomes either the partners can settle the issue or they can’t. Settling the issue may require using alternate dispute resolution strategies. If both sides can reach an agreement, the business continues in a much stronger place.

If they can’t, likely one of three things can happen. The owners will attempt to:

  • Sell the business: Selling the company to a third party may be the fastest way to end the dispute if you and your partner can’t meet in the middle.
  • Split the business: While not necessarily simple, there is a likelihood that you and your partner could split the operation. This isn’t an option in every case.
  • Dissolve the business: Dissolving a business is a time-consuming endeavor. It requires finding buyers for all the equipment, the real estate and stock.

Needless to say, a partnership dispute can turn a profitable business into something unrecognizable with astonishing speed.

Can you stop a dispute?

One of the most effective ways to settle disputes before starting is to craft a robust and transparent partnership agreement. With that in place, you can develop rules for interaction, authority areas, and well-defined communication.

You can settle well before things get out of hand by starting strong with an agreement. However, sometimes it’s necessary to fight, and when that happens, you must be ready for any outcome.