Three Common Types Of Business Partnership Disputes Over Profits
Profits are the lifeblood of a business partnership. It takes a tremendous amount of work to form, build, and develop a successful business partnership. Profits can make the endeavor worth the effort for entrepreneurs. Profits—and other financial considerations—are also the leading reason why business partners get locked in disputes. Here, our Miami partnership dispute lawyer highlights three of the most common types of business partnership disputes over profits.
- Disputes Over Each Party’s Percentage of the Profits
One of the most common reasons why business partners get locked into disputes over profits is that there is a disagreement over each partner’s share of the business income. Ideally, the written partnership agreement should clearly provide an answer to these questions. However, it is not uncommon for disputes to arise over complicated matters.
- Disputes Over What Constitutes a “Profit”
The term profit can actually be quite difficult to define in practice. At the broadest level, Investopedia defines profits as the income/revenue that is generated “beyond the costs or expenses a company incurs.” It is entirely possible that two parties acting in good faith could review a partnership’s finances and come up with a different number for its “profits.”
- Disputes Over Whether Distributions Should Actually Occur
Profits do not always have to come out of a partnership business. Indeed, it may be a financially wise decision to leave money in the partnership and invest it into growing the business further. Each situation is different. There can be sharp disputes between business partners about whether or not there should be distributions of profits at all. In some cases, business partners may disagree about the share of total profits that should be issued as a distribution.
Partnership Disputes are Often Strong Candidates for Non-Adversarial Solutions
A partnership dispute does not always mean that you are going to have to fight a lawsuit in court. Quite the contrary, business partnership disputes are frequently very strong candidates for alternative dispute resolution (ADR). ADR can help to preserve the professional relationship between business partners. Some examples of alternative dispute resolution include:
- Informal negotiation;
- Structured negotiation;
- Business mediation; and
- Arbitration.
When there is a dispute over profits, the partnership is, by definition, making money. There is at least some level of business success—and a serious legal battle could undermine that success. While litigation may be needed in some cases, it is always best to start by exploring all options for alternative dispute resolution with an experienced Florida partnership law attorney.
Call Our Miami Partnership Law Attorney for Immediate Help
At Pike & Lustig, LLP, our Florida commercial litigation attorneys have extensive experience representing clients in partnership disputes. If you and your business partner are locked in a legal dispute over profits, we are available to help. Give us a phone call today to set up your private appointment with a lawyer. From our office in Miami, our office in Wellington, and our office in West Palm Beach, we handle partnership disputes across all of Southeastern Florida.
