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Why do some business partners fall out?

On Behalf of | Dec 11, 2023 | Business Law

Running a company on your own can be a daunting task. You have to take all of the financial risks and then oversee the day-to-day running of the company. That’s why many business owners opt to enlist the assistance of a business partner. 

A business partnership can be extremely beneficial when it works as it should. Nonetheless, as with all aspects of business, things can go wrong. Sometimes, partners fall out

How does this happen? 

Breaches of fiduciary duties 

Business partners are legally obliged to act in the best interests of the company. In other words, they have fiduciary duties. This means that all decisions regarding the company should focus on the profitability and sustainability of the company. 

If a business partner makes a decision based on personal interests, to the detriment of the company, this is a breach of their fiduciary duty. For example, if they withdraw company funds for personal benefit and subsequently leave the company saddled with debt. Breaches of fiduciary duties are a common source of partnership disputes. 

Disputes over responsibility and authority

Some business partnerships involve a 50-50 split in terms of responsibilities. Others involve one partner being a silent partner. This is something that needs to be clearly established. 

If one partner feels ostracised and out of the loop, they may become frustrated, angry, and resentful.

Business partners are bound by the terms of the partnership agreement. If you are in the midst of a dispute with a partner, it’s important to resolve the situation promptly. Seek legal guidance to find out what options you have at your disposal.