When a business reaches a certain size, it can be beneficial to form a partnership. Business partners can share financial responsibilities, legal obligations and daily efforts to run the company.
However, partnerships don’t always operate smoothly. The corporate world is notoriously challenging and this can take its toll on the partnership – and that can quickly lead to litigation. Here are two common causes of partnership disputes.
Breach of fiduciary duty
A partner is a fiduciary. Essentially, this means that they must always act with the best interests of the company in mind. They must be loyal, diligent and responsible. There are several ways that fiduciary duties can be breached. For example, if a partner makes a careless investment without discussing it with anyone else, this may be a breach of fiduciary duty. Fiduciary duties can also be breached if a partner helps out a competitor or uses the business solely to make a personal profit.
Lack of commitment
How each partner conducts themselves is also very important. Each partner’s roles and responsibilities should be clearly outlined in the partnership agreement to avoid confusion. When a partner does not carry out their duties as agreed, then a dispute can arise.
Sometimes, a partner may be looking for a way out. It’s a reality that all business partnerships come to an end at some point. Nonetheless, a partner should leave in the right way and adhere to the legal obligations that are in their exit agreement.
If you’re dealing with a partnership dispute, it is important to act quickly. A drawn-out dispute can cause financial and reputational damage. :egal guidance can help you explore your options.
