Those who start a business together generally want to maintain a positive relationship. Partners have to fully commit to their shared company if they want to run a successful organization in most cases, so both partners rely on one another to do their individual jobs to the best of their abilities. They need to trust each other and fully commit to developing the business. When successful, the partners will share the fruits of their labor.
Unfortunately, not all business partnerships remain healthy and amicable relationships. Sometimes, business partners end up embroiled in conflict and may even fight each other in court. Litigation between partners may force one out of the company or even lead to the dissolution of the business. These are two of the more common reasons that one business partner decides to take legal action against another.
A violation of their agreement
Partners may have spent days negotiating fair terms for what each would contribute to the business and receive in turn. Unfortunately, not every business partner will do their best to fully uphold their obligations as outlined in their partnership agreement. Some people may never invest financially what they said they would in the company, while others may continue working a full-time job elsewhere and never mentally embrace their role at the organization. In scenarios where one partner has failed to fulfill their contractual obligations to the other or the business that they create, that could potentially lead to a lawsuit.
Incompetence or embezzlement
Occasionally, one partner overstates their ability and then makes major, expensive mistakes. They might also become so complacent after starting the company that they no longer perform their job to the best of their abilities. Other times, those helping run a successful business will covet a larger share of its profits and will find ways to steal from the organization that they help start. Both incompetence and embezzlement could reduce the resources that the business has and the compensation for the other partner, thus potentially leading to a lawsuit.
Partnership lawsuits can potentially result in dissolution or sometimes a forced buyout. Other times, a judge can compel one partner to follow through with their promises to the other. Recognizing when legal action may be necessary to resolve a partnership dispute can help those who currently co-own a business and are worrying about the future due to their partner’s current approach.