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Why do business partners sometimes have a falling out? 

On Behalf of | Jul 15, 2024 | Business & Commercial Litigation

A business partnership can be a highly beneficial arrangement. It means that more than one party shoulders the responsibility of managing finances, team members, client relations and much more. 

That being said, a partnership is only beneficial when partners get along. Partnership disputes are fairly common. Here are some of the more common reasons business partners fall out. 

Profit divisions 

Generally, business partners will agree on a profit-sharing arrangement that is drafted into a partnership agreement. Funds may be released according to how well the business is doing in terms of profits. Sometimes, particularly in the case of startups, it can take time before partners receive a salary from the business. 

This does not always go down well with partners who expect to immediately make money from the business. How profits are divided and distributed is one of the most common sources of partnership disputes

Division of labor 

Business partners should complement each other in terms of skills and experience. For example, one partner may be a people person who can motivate team members. The other may be excellent with numbers, so can analyze all of the relevant data. 

Whatever each partner’s role is, the division of labor should be fair. Disputes can soon arise when one partner feels like they are having to do much more work than the other. 

Decision-making authority 

Another aspect that should be made clear in the partnership agreement is who makes key decisions. For example, does one partner have the final say on certain matters? Must all decisions be made jointly? 

When a partner feels disregarded, undervalued or undermined, this is sure to result in a dispute.

Partnership agreements are contracts that can prevent and resolve disputes. To get your partnership off on the right footing or resolve an ongoing dispute, legal guidance will be helpful.