Here’s What Partnerships Fight (and up in Court) About

A partnership can be a great way to start a business. One big benefit of a partnership is the sharing—you not only share in the profits and losses of the company, but you also share in the responsibilities. That means that each partner can do what he or she does best, to contribute to the success of the partnership.

But partnerships can, and often do, end up in lawsuits. Like anything else, people are people, and they often disagree—especially when it comes to jobs and money. Partnerships can be a huge source of lawsuits and litigation. Here are some of the most common things that partners fight about or worse, end up in court about

Pulling Your Weight – At the start, everybody’s job is clear—this partner has that responsibility, that partner has that job. But sometimes partners don’t pull their weight and they don’t do their job—or at least, the other partners perceive it to be that way.

At some point other partners don’t want to pay the “non working” partner the money he or she may be entitled to. They ultimately end up in litigation over the nonpayment, and the failure to do the work the partner was supposed to do.

Payouts – Sure, you’re all going to share in the profits of the partnership. But what are the profits? When the partnership makes money, some partners may want to reinvest that money into the business, while others may want to simply “cash out,” and get paid.

When partners don’t have a clear agreement on what will be done when and if the partnership makes money, disputes can arise.

Future Direction – The partnership started with a clear goal, and a clear direction. But often partners want to do new things. Branch out. Expand the scope of the partnership. Not all partners may agree on that. It’s important to be on the same page when a partnership decides to expand beyond their original scope.

Liabilities – Yes, you may have agreed to share in the company’s liabilities and debts. But what if one partner just makes a mistake? On the one hand, that’s the nature of a partnership—you take the good with the bad, and all may suffer for one partner’s error.

But in reality, partners may fight back and argue, and may be unwilling to have to pay or take responsibility for one partner’s error.

Duration – Your partnership may go on, indefinitely. But if that’s not stated, you don’t want a situation where some partners are ready to walk away, and others think the partnership will continue.

The answer to a lot of these problems is a solid, comprehensive partnership agreement. A partnership agreement can be tailored to your needs, and address almost every contingency or event—helping the partnership stay together, and out of court.

Let us help you with your partnership agreement. Call the West Palm Beach business litigation lawyers at Pike & Lustig today for help today.

Sources:

uschamber.com/co/start/strategy/how-to-write-a-partnership-agreement

investopedia.com/ask/answers/041015/which-terms-should-be-included-partnership-agreement.asp