What are the most common reasons for partnership disputes in organisations?

30th Oct 2017
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Just like any other relationship, a business relationship too has its fair share of ups and downs. No matter how strong your relationship is with your business partner, disputes are bound to arise sooner or later. When business partners are disputing, their quarrels tend to disrupt the daily goings-on of their organization. If they are not careful about keeping their disputes between themselves, it can result in the failure of their organization. Conflicts between partners aren't restricted to businesses that aren't doing well; partners of even the most successful businesses tend to bicker every now and then.

Image: Shutterstock

Image: Shutterstock

Here are the most common reasons for partnership disputes:

Financial disputes

One of the top causes of partnership disagreements is disputes about financial rights and obligations. This dispute generally arises when the company is undergoing financial stress. If there is no clarity in the partnership agreement about how liabilities will be handled and profits will be shared, serious management-level problems are bound to occur. Misusing assets for personal use is yet another cause for financial disputes between partners. Sometimes, one partner thinks it's fine to use the company car to run personal errands, but the other does not.

Authority disputes

Sometimes, despite having fool-proof partnership agreements, partners don't respect each other's areas of expertise and tend to overstep their boundaries. When this happens, some things end up not getting done by anybody, and some other things don't get done because there are too many partners sticking their nose into the same thing and offering different perspectives. The best solution to this is to establish a set chain-of-command and different areas of authority.

Income disputes

Several partners are unable to decide how to use their income to better their business. While one partner prefers investing the money in marketing, the other partner could be more intent on introducing a new product into the market. If partners are not careful, disagreements on small things can quickly turn into big problems.

Workload disputes

It's an unfair partnership if one person clearly does more work than the other and yet profits are distributed equally between the two partners. Partners need to understand that strength comes from numbers. If one partner is constantly bearing a larger portion of the workload burden, the underlying relationship gets strained overtime. The entire point of a partnership is equal division of responsibilities to sustain a business.

Company objective disputes

One business partner may have a certain direction for the business in mind which may differ from the other partner's objectives for the company. For instance, one may want to expand the business in a different location while the other may not want to expand so soon. If partners constantly disagree on what direction their business should head in, the company can get split into two.

Proper planning, written agreements, and mutual understanding are the only way to avoid any sort of disputes. However, if a dispute does arise, it's best to see a business attorney before matters get worse.

Read Also: Know your partnership: LLP vs. partnership firm

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