Real-World Solutions To Real-World Challenges

4 common sources of partnership disputes

On Behalf of | Feb 24, 2020 | Business Formation & Planning |

Forming a business partnership is often an effective way to share risk and increase the odds of success. Nevertheless, because you have to work closely with your business partners, you must choose them wisely. Even if you pick the best individuals for your business venture, though, you may eventually have to deal with a partnership dispute.

Ongoing business disputes can be disastrous for any organization. If partners are fighting, you may experience a significant disruption in your business processes. Even worse, if you cannot resolve your disagreements, you may have to end the partnership altogether. Here are four common sources of partnership disputes you may encounter:

  1. Financial friction 

When there is plenty of cash, partners tend to be happy with financial matters. If your venture enters a downturn, though, financial arguments may arise. These often happen when partners cannot agree about distributing profits and losses. They may also occur if a partner uses company resources for personal purposes.

  1. Undefined boundaries 

Robert Frost famously wrote, “good fences make good neighbors,” about the importance of healthy boundaries. Unfortunately, though, business partners often forget this lesson. To decrease disputes within your organization, you should have clearly defined roles.

  1. Misused resources 

For your organization to succeed, you must retain existing customers while attracting new ones. Still, you and your business partners may strongly disagree about how to accomplish this objective. If a partner believes someone is squandering resources on unnecessary endeavors or frivolous purchases, you may have a serious disagreement to address.

  1. Personality conflicts 

Finally, it is important to realize that personality conflicts can arise in any business organization. These may be due to human nature or fundamental differences in business philosophy. Nonetheless, if you do not manage these conflicts, your organization may suffer.

In partnerships, disputes happen for many different reasons. Fortunately, there are a number of ways to resolve partnership conflict. Understanding why disputes often arise is typically the first step in quieting them.