People who start a business together as partners generally share the same priorities. They want to develop a specific type of company and make it as profitable as possible. They will typically agree to a specific division of financial and practical responsibilities for the organization as a result of their shared vision.
Ideally, they will be able to continue working cooperatively for the indefinite future. Unfortunately, the relationship between the partners could eventually cause challenges for the company. When disputes arise, one business partner may take the other to court over their joint venture. The following are some of the most common reasons for lawsuits between business partners.
A contract breach
Maybe one partner has failed to commit the financial investment to the company that they initially promised. Perhaps they have taken a side job and no longer huh fulfill their business responsibilities consistently and on time. Those violations of the initial partnership agreement can undermine the success of the company and potentially lead to a lawsuit because of the damage it can cause to the company or the partnership relationship.
Significant misconduct
Sometimes, one partner starts stealing from the company. Misappropriating business resources, stealing cash or adding extra costs onto client invoices for personal profit are all forms of embezzlement that can damage the company’s finances and its reputation. Such actions constitute a breach of the fiduciary duty that business partners owe the organization and one another and could therefore justify a lawsuit.
Disagreements about business decisions
Perhaps one partner wants to sell the company because there has been a generous offer from a competitor. Maybe they would like to exit the company and have failed to negotiate a buyout with the partner who wants to continue running the organization. When there are disagreements about the future of the organization or issues with a potential buyout, that can trigger litigation as well.
Those entering a business partnership can prevent unnecessary lawsuits by including the right terms and their agreements. Clauses requiring alternative dispute resolution before taking a matter to court could help partners amicably resolve disputes about how they run the business or who continues owning it.
