Partnership Dispute Attorneys
A business can vary in the nature of its incorporation. It may be a sole proprietorship, partnership, or a company. No matter what the structure of the business, disputes can arise on any level. A partnership might be between 2 or more people. Whenever more than one person holds ownership of an entity, conflicts become inevitable. All major companies in the world, Facebook, Apple, Microsoft, etc., started as partnerships between a few people and almost all of them had a falling out along the way. This article provides an overview of common causes and remedies in partnership disputes and how those issues can impact your business and ownership.
What is a partnership?
It is an agreement between two or more parties to initiate, manage, and operate a business. A partnership can be formed between individuals, businesses, or any other organizations that wish to work jointly on a venture. In terms of advantages and disadvantages, partnerships are closer to proprietorships. The difference is that the liabilities in the former can be limited through certain agreements. Partners can agree on how much they’ll be liable to pay in case the business suffers losses or goes bankrupt. What is also very important is that if you are considering that you are operating your business as a partnership — that you properly structure the business, if you do not, it may have negative impacts on the business in the future.
It is not necessary that every partner should take part in the daily operations of the business. There are provisions for silent partners, and their ownership and liabilities are determined according to pre-meditated agreements.
Common causes of partnership disputes
Right off the bat, the prospects of disputes can be identified. Partners can have a hard time deciding on the extent of liabilities for each partner. No person or group would want the unlimited liability of the venture, but someone will have to take it. This can cause discontent among the partners. Besides this, there are other reasons why partnership disputes might arise. Our partnership dispute lawyers handle all types of litigation, however, the five most common causes our law firm sees that result in partnership disputes are:
- 1. Contract breaches: A partner or partners might violate certain clauses agreed upon in the contract. There can be different types of contracts and even several of them at the same time. Multiple contracts can define the terms of the business and the powers of the partners respectively. A partner can breach the terms in either of these agreements, thus creating cause for concern.
- 2. Disclosing sensitive information: It goes without saying that certain information in a business is confidential and it can’t be disclosed without the consent of all the partners. Any person or organization violating this term due to any reason whatsoever can give rise to conflicts in the partnership.
- 3. Undisclosed earnings or secret dealings: Individual partners may be inclined to indulge in creating separate side businesses or even perform under the table deals while being part of a partnership. The latter is illegal, and the former can be termed as a violation of the business agreement if there is such a provision in it.
- 4. Underperformance: There are certain unsaid expectations in terms of performance from every partner. Any person or company that fails to meet these expectations substantially can create potential hazards and losses for the company. This can generate disputes amongst the partnerships too.
- 5. Personal and managerial conflicts: Most common disputes arise from differences in strategic or operational decision making. Partners can also disagree on a personal level and these conflicts can grow into major disputes.
How to avoid or minimize disputes?
While at times conflicts and disputes become inevitable, there are a number of things that can be done to mitigate their sources. These include but are not limited to:
Draft agreements under professional supervision
A written agreement is one of the most effective measures in reducing the risks of disputes. Once a contract is drafted and signed, it becomes a legal document. Any party that violates the terms that were agreed upon can be taken to court. This works quite well at keeping most people from committing violations due to the fear of legal action. However, people can still look for loopholes in the contract to commit certain breaches. This is where an attorney comes in handy.
This professional has extensive experience in drafting legal documents. Working under their supervision can allow you to cover each and every aspect of the agreement, making sure that there is no room for violations.
Discussion and communication are crucial
It is important to sit down and understand the nature of the people that you are about to engage in business with. The agreement should be quite elaborate with provisions for how the business will be managed, the roles and responsibilities of each partner, and the liabilities that each party will share. It should also include certain fail-safe mechanisms in case a dispute does arise.
Discussions are by far the most effective ways of ensuring that disputes are kept at bay. If there are clear lines of communication and if there is a culture that allows discussing things amongst the partners, the chances of there being conflict is substantially reduced.
If everything has been done to reduce dispute risks to a minimum but an issue still crops up, then parties have three common ways of dealing with them. These actions may be ordered by the court or decided upon by the partners themselves. Generally speaking, Florida Courts require litigants to go to mediation at least one time before their case can proceed to trial. The top rated partnership dispute attorneys will have the best understanding on how to use the dispute resolution process to help their clients win their cases. Some of these alternative dispute resolution processes include:
- Arbitration: The process involves a court or independently appointed arbitrator who helps both the parties discuss the problem while he (the arbitrator) listens to their arguments. He then reserves and issues a judgement, which is legally binding upon both parties.
- Mediation: This option is close to arbitration, but the only difference is that the mediator doesn’t give a legally binding judgement. They only facilitate the discussion and help the parties discover angles in the conflict that they might not have seen earlier.
- Negotiation: This is the most common and preferred form of dispute resolution. The two parties sit down on their own without a third party. They discuss and come to a solution on their own.
Resolve Partnership Disputes Beforehand
Partnership disputes are quite real, and the best way to minimize the damages caused by them is to think about ways to resolve them beforehand. Shiner Law Group has a team of some of the most proficient lawyers that help partners draft complete and effective documents to mitigate the risks arising from these conflicts. Before you find yourself in a lawsuit or other legal predicament, call the trial lawyers at our firm to assist you in your legal business problems. Get in touch with us to discuss your specific matter in greater detail.