Falling out with a business partner and dealing with the impact of potentially dissolving a business partnership can be extremely daunting, especially if there are regulatory or tax issues to consider. Furthermore, if partnership disputes are not dealt with quickly and correctly, the resulting implications could lead to lengthy and costly legal battles.
For example, the disagreements between Facebook (now Meta) founders Eduardo Saverin and Mark Zuckerberg led to a notoriously messy and lengthy legal battle regarding their business partnership that eventually settled out of court. Although terms of the settlement agreement were never discussed publicly, Saverin reportedly received $5 billion in shares (or 4 to 5 percent of them).
While partnership disputes of this magnitude are unique, business partnership breakdowns are not uncommon. It is thought that over half of business partnerships end up failing over time.
In this article, our dispute resolution team looks at how to efficiently deal with business partnership disputes and the best way to protect your interests.
What is a partnership agreement?
One of the most crucial aspects of setting up a business partnership, even with a close friend or family member, is having a clear, formal, written partnership agreement in place. A partnership agreement is a legal document that specifies the relationship of the partnership, the roles and responsibilities of each partner and how ownership is split. Crucially, it should also set out a dispute resolution process with distinct instructions on handling disagreements and what to do if partners wish to dissolve the business.
Without one, partnership disputes can become complicated, lengthy, and potentially involve costly court proceedings, as establishing “who owns or is responsible for what” at this stage can be challenging. Typically, if there is no formal agreement to refer to, the Partnership Act 1890 will apply. Subsequently, in the event of a partnership dissolution, without clear direction on what was agreed, partners could be expected to share all the profits of the partnership equally.
You must follow specific processes correctly depending on the nature of your business and the type of partnership arrangement you have, such as a general partnership, limited partnership, or limited liability partnership. Before acting, it is advisable to seek specialist legal advice to ensure you meet any regulatory or legal obligations and that your best interests are protected.
Dispute resolution for partnership disputes
Where a formal partnership agreement is in place, you should review this thoroughly in the event of a dispute, ideally with the help of a specialist dispute resolution lawyer, especially if the relationship between the other business partner has broken down or communication is strained.
Our dispute resolution lawyers can advise on all areas of partnership disputes and guidance on a partnership dissolution process. Resolving matters by agreement or alternative dispute resolution techniques will always be our main aim. However, where this is not suitable, or if negotiations fail, we will offer advice and guidance on representing you in the courts if necessary, providing robust litigation services.
Partnership Dispute Solicitors
Dealing with a partnership dispute is sometimes unavoidable, and when you cannot solve this on your own, seeking legal advice early on can stop a matter from escalating. Our highly skilled commercial law team will answer any questions, providing straightforward and practical guidance on achieving your objectives to enable an efficient resolution.
Please get in touch with a member of our team below to discuss the best way forward for you, and we will provide you with further and specific advice tailored to your circumstances.
This blog post is not intended to be taken as advice or acted upon. If you are seeking legal advice, please contact our team of solicitors