How to address partnership disputes

A business partnership is like a professional marriage. Two or more partners come together to launch a new business, and there is often a great sense of optimism. Over time, however, the relationship can become strained as partners disagree on the direction of the business, how to run it, or there may be interpersonal problems. These issues and others can challenge the ongoing viability of a successful arrangement.

This can lead to a so-called business divorce where irreconcilable differences become too challenging to overcome. This forces the partners to sell the business, close it, buy out a partner. Conversely, despite the challenges, there may still be much to gain from continuing to work together.

4 steps for deciding what to do

Partners can follow these steps for determining what to do with the partnership:

1. Communication: Perhaps the partners have created walls that limit the creative dialogue. Suppose all agree to it, schedule meetings to discuss the business and partnership’s future. The partners should be set aside for airing grievances, but it should not be an occasion to be petty or do additional damage.
2. Review the options: This involves how the future could look based on different decisions, such as dissolving or dividing the company versus staying the course with a renewed sense of purpose.
3. Actionable decisions: The partnership can then determine an actionable strategy for keeping, selling or dissolving it. There may be a decision to pursue arbitration (perhaps as outlined in the original partnership agreement).
4. Legal action: It may be necessary for a partner to pursue litigation to protect their financial interests or the business itself. This will likely be the case if there are alleged cases of misappropriation of assets, fraud, breach of fiduciary duties, or failure to obligations or expectations.

Attorneys can help the partners with any or all of the above steps as they decide what to do. Ideally, it is best to get these legal professionals involved before taking legal action, but this is not always possible.