The Facts of Partnership Disputes

In many corporate entities, one of the most important aspects is the partnership. While partnership disputes are often inevitable in these settings, there are ways to prevent minor disputes from turning into something much bigger and uglier than before. Therefore, when facing a partnership or shareholder dispute, it's important to solve the dispute as quickly and discreetly as possible to minimize or even avoid losses. As time goes by and challenges begin to strain the business, one of the biggest threats to the stability of a business is disagreements within management and/or among shareholders. Disputes can also disrupt business operations, so it’s also important to solve this dispute to keep things running smoothly and let the parties involved get back to business.

Why Do Partnership Disputes Occur?
While there are a variety of reasons a partnership dispute can arise including salary issues, unfair termination, mismanagement, fraud, breach of contract, missing funds, future business plans, division of work, withholding information, or determining the fair value of one’s shares, disputes often occur due to three main reasons:

  • Financial issues – Financial issues occur if one partner taking too much cash out of the business, or both partners having different financial needs.
  • Profit sharing arrangements – This can result because one partner is unhappy with the other partner's input into the business (or lack thereof), and he does not feel that the profits should be shared equally.
  • One partner wants out – When one partner opts to leave the business, messy complications can occur, causing a dispute to erupt.

However, it's certain that disputes often occur because people don't work out details beforehand and neglect to write up a contract outlining what is to happen in these situations, which should be agreed upon by all involved partners.

How Do You Avoid a Partnership Dispute?
When forming your partnership, it's important to clearly outline how each one of these situations will be handled before they have a chance to occur. The biggest mistake that people make is neglecting to think ahead about these possible situations due to the fact that they have a good, stable relationship with their partner or shareholder. Families also often neglect to write up a contract outlining the answers to such disputes.

When a dispute such as listed above arises, you should contact a California business litigation lawyer as quickly as possible – the sooner you contact a lawyer, the more quickly and effortlessly things will be solved.

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