Partnership disputes can bring about complex litigation. Business partners may find themselves at odds regarding their roles and responsibilities, or there may be financial conflicts. One business partner may want to exit the partnership entirely, or there could be claims that one party has financially harmed the business.
In some cases, these types of disputes and disagreements can be avoided simply by creating a partnership agreement in advance. This is a type of contract that can be established when the partnership begins.
Defining terms and addressing conflict
The advantage of a partnership agreement is that many of these conflicts can be addressed upfront, or terms can be clearly defined so that all parties are on the same page.
For instance, litigation sometimes arises over ownership percentages. If there is just a verbal agreement, one partner may assume that they own 50% of the business while the other person considers themselves the majority owner and believes they have the unilateral authority to make important business decisions on their own.
Simply by drafting a partnership agreement up front, the partners are forced to discuss important things like financial responsibilities, division of revenue and the division of ownership shares.
Of course, some disputes are still possible. But even then, having a written agreement can help as both parties seek a resolution, whereas handshake deals and oral agreements can be very hard to enforce.
Addressing partnership issues
Partnerships can be very profitable and successful, but they do create the potential for litigation. It is important for business partners to understand all of their legal options when disputes arise.