Legal Specs

Dealing With Partnership Disputes

17 Sep 2008

Partnership is established when two or more entities agreed to form a business for profit. This is managed by the partners themselves. Thus, conflicts, clashes or arguments in partnership are inevitable which more often lead to partnership disputes.

Why partnership disputes occur

Partnership disputes may arise from the formation up to the operation of the business. This occurs in different circumstances such as:

• matters involving money- this includes the capital accounts, contribution, payment share
• management authority
• profit sharing
• liability of partners
• distribution of properties, assets
• unfairness, inconsistency among partners

Avoiding Disputes

There is no specific federal law that governs partnership or partnership disputes. However, there are states with enacted statutory and common laws in governing partnership or forming a business in their territory.

Although there are such existing laws, it is still important that before establishing a partnership business, you and your partner must design an agreement.

In making your partnership agreement, you must consider the following:

1. Sharing of ownership interest- If you are going to share the ownership and authority equally, you should make sure that it is stated and explained clearly in the agreement.

2. Decision-making- Both of you must set voting rights just in case a major disagreement will arise.

3. Purchase price agreement- This is important in case one partner withdraws, you will determine the price of the partnership interest.

A partnership agreement generally administers the issues and affairs regarding the business. This includes the objective of partnership and a detailed explanation of the partners' contribution, responsibilities and limitations.

The agreement also contains the rules and conditions relating to business; the sharing of profit and the terms on how conflicts and misunderstandings will be solved. In general, partnership agreement is very essential to avoid partnership disputes.

Creating a Winning Partnership

Aside from devising a good agreement, here are some tips in forming a winner business partnership.

• Identify the roles of each partner. It is important that before entering into a business, you and your partner knows each skills, strengths and weaknesses. It will help both of you to know how are you going to utilize your abilities and how will you become productive to the business.

• Create a same visualization of your business. Both of you must have a similar viewpoint regarding the goals, objectives and purposes of your business.

• Schedule meetings. Good communication is definitely important in a business. Although it is hard to find time due to busy schedules, it is good that at least twice or thrice a month.

You will have meetings to tackle things, issues and matters concerning your business: creating a plan, sharing views on certain affairs that may or may not affect your business. This will also help in establishing a strong and deep relationship among partners.

• Seek the assistance of a business lawyer. In business partnership, it is necessary that you are guided and assisted by a lawyer especially in designing and constructing your agreement.

A business attorney will also be helpful particularly when legal issues arise. And in case you have a partnership dispute, your lawyer will be your mediator and will help settle things for both of you.


If partnership disputes arise in tour business, seek the assistance of our expert Los Angeles Business lawyers. Log on to our website and learn how we can help you.