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Business partnership disputes often revolve around two key issues: the existence of a partnership and the dissolution of a partnership. This article explores what constitutes a partnership, these common types of disputes, and gives some insight on the possible solutions.
In simple terms, a partnership is a relationship between individuals, trusts, or companies that carry on a business together with the goal of making a profit. Partners share control and management responsibilities to ensure the business moves in a consistent direction. Importantly, a partnership is not a separate legal entity, and all partners are personally liable for the partnership’s debts.
Partnerships are generally governed by partnership agreements and regulated by the relevant jurisdiction’s partnership legislation. A partnership relationship does not need to be documented in writing to exist; it can be written, oral, partly written and partly oral, or even implied from the parties’ conduct.
Not all business relationships qualify as partnerships. For a partnership to exist, the parties must:
Business partnership disputes can arise for various reasons, including disagreements over:
When a dispute arises, it is crucial to resolve it satisfactorily or determine the appropriate course of action to seek a resolution.
Disputes over business strategy, expansion plans, and management roles can often be resolved effectively through negotiation and mediation.
When partners disagree, they have a responsibility to act in the best interest of the business and each other. They must also adhere to the terms of the partnership agreement and fulfill their contractual obligations.
Here are some considerations for partners when disputes arise:
Partners must communicate clearly and effectively to understand each other’s concerns and work towards a resolution. Effective communication can help prevent misunderstandings, reduce tensions, and build trust.
Partners must act in good faith towards each other and the business. They should not take actions that harm the business or its reputation or act dishonestly or unfairly towards each other. Tit-for-tat responses are almost never helpful.
Partners may need to seek experienced advice to resolve disputes effectively. This can include legal, financial, or business advice. Partners should make decisions based on expert advice that is in the best interest of the business. Drawing on legal, accounting, and taxation expertise can be a valuable investment. Independent advice can assist in decision-making, reduce misunderstandings, and prevent more costly disputes.
Partners must continue to meet their obligations to the partnership while working through their dispute. This includes fulfilling contractual, financial, managerial, and other obligations under the partnership agreement and legislation.
Partners must avoid conflicts of interest that may harm the business or undermine their relationship. They should disclose and seek independent advice on any potential conflicts of interest. Even in a dispute, it is vital to continue acting in the best interests of the business.
Business partnership disputes can be time-consuming, expensive, and stressful. It is crucial to resolve disputes quickly to minimise the impact on the business and retain its value. If a business is troubled by issues, it will not be long before clients, employees, and even suppliers are affected.
Here are some steps partners can take to quickly resolve a dispute:
Partners must communicate effectively and transparently to resolve disputes quickly. They should identify the root cause of the disagreement, listen to each other’s concerns, and work towards a resolution.
Partners can seek the assistance of a mediator to facilitate discussions and negotiations. Mediation is a key component of any formal dispute resolution process and often yields a settlement without the need for further legal action. If handled correctly, mediation can restore the business relationship by allowing each party to hear the other’s grievances and respond constructively.
If the issue is irreconcilable or urgent action is required, legal proceedings such as injunctive relief or court proceedings may be necessary. A business partnership dispute lawyer will need to assist you by advising you of your rights and the legal options available to you.
Many disputes can be settled quickly and efficiently with the right legal advice from the outset. Business disputes can be complex and require careful consideration of many factors to achieve a commercially viable outcome and finality.
At Kingsford Lawyers, our experienced litigation lawyers can provide clear guidance, combining legal options and commercial considerations specific to your business. Consulting a lawyer early is key to giving you as many options as possible and preserving value.
Our team is skilled in handling a wide range of business disputes, from prompt resolutions to managing complex court proceedings. We ensure our clients are fully advised and understand their options, enabling them to make informed decisions about the best course of action for their business.
If you have a business partnership dispute and need advice on how to approach the situation, speak to one of our lawyers early to get guidance on achieving a resolution.
Call us on 1300 244 342, send us an email at admin@kingsfordlawyers.com.au or complete our online form , and we will respond promptly.
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