Business Partnership Disputes

Business Partnership Disputes

When two or more people get into a business and share the profits or losses, a partnership is automatically created.  It is not mandatory to have a partners agreement; the business is governed by 1980 Partnership Act if there is no written agreement.  However, it is advisable to have a formal partnership agreement as it helps in the case of dispute and the matter can be resolved in a much simpler way.

Whenever there is a dispute between you and your partners you need to review the agreement carefully and understand the different terms and conditions which can deal with the issue.

In the absence of a formal partnership agreement you need to collect all the evidence of the informal agreement such as emails or any other form of correspondence.  This will help you find out any information on how you both intended to deal with any disputes.

Common causes of business partnership disputes

1)     Equal profit share but unequal distribution of work:  There are businesses in which partners share equal amount of profit but the work load remains on the hard-working partner.  With the business expansion the workload increases but the profit percentage remains the same which may result in a dispute.

2)     Difference of opinion: There are many important decisions to be made in a business and if one partner does not agree with other’s decision this might give rise to clashes and further lead to disputes.

3)     Different vision and priorities for the business: If the partners have different visions for the company and wish to run the business in their own way, it will have a negative impact on the business resulting in disputes.

4)     Breaking trust: Trust is the most important factor in any business.  If one partner does something without the knowledge of the other partner, tries to hide things or obtain profits, without agreement this will lead to partnership disputes.

5)     Unsuccessful business:  If the business is running into difficulties one partner may wish to distance themselves from the business and their joint responsibilities liabilities or debts.  This can be one of the causes for a dispute.

Business partnership disputes often leads to a lawsuit.  The court will review the partnership agreement and determine which party is at fault.  The court may ask the breaching party to pay some amount as a compensation to the other party.  This will help the other party to cover some of the losses incurred in this whole process.  In the case of very complex business disputes it is advisable to hire a business lawyer who can guide you through the complete process of resolving the matter. This is where PowerLegal can help. Get in touch for a free commercial litigation no win no fee appraisal.