Before you enter a business partnership with another party, it’s important to map out the steps you need to take to protect your business and successfully expand. It’s also important to consider effective ways to avoid a dispute down the road. As the Sarasota construction attorneys at Cotney Construction Law will discuss throughout this five-part article, when a business partnership does dissolve, this can lead to a lot of issues, including one of the parties taking legal action. Remember, before you agree to any business partnership, contact a construction attorney to review your contract to ensure that your best interests are covered.
Common Reasons Why a Business Partnership Dispute Occurs
Business partnerships dissolve for a variety of reasons. Here are a few examples of why a partnership comes to an end:
Business partners may not agree on fundamental issues like the growth strategy of the company. For example, one partner may want to expand to other locations and markets, while the other partner would prefer to focus on one location. In other cases, one co-owner may want to provide additional services, whereas the other owner may prefer to focus on their niche. Regardless, these differences can result in the partners agreeing to go their own direction.
The majority of businesses fail because of the mismanagement of their operations. Many partnership disagreements occur because one party is too involved in an area outside of their comfort zone, and this leads to a dispute with another partner. Other times, there may be disparities between each partner’s role when one partner isn’t pulling their weight. Regardless, when the two sides can’t reconcile their differences related to operational control, this can lead to a dispute.
Money always factors into a business partnership. It’s critical that business partners clearly outline their financial obligations well in advance to avoid any disputes down the line. This includes not only the financial aspects of the company like shareholders and tax disbursements but also issues like access to company property for personal use. If the business is lacking cash flow, behind in payments, or if a business partner was negligent with accounting practices or misappropriating funds, this can lead to a dispute.
Breach of the Agreement
Whether one partner breached the contract, shared a trade secret with a third-party, stole intellectual property from their partner, or failed to comply with the law in any other way (tax evasion, defective products, fraud), any of these issues could not only lead to a dispute but also dissolve a business. When a breach of contract occurs or a business partner fails to comply with regulations, this is a common catalyst for a dispute that will require legal recourse.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.