One potential reason for conflict in a business partnership is that there are financial issues the partners have not resolved. This is why it can often be helpful to draft a partnership agreement addressing these issues upfront.
Financial conflicts can grow complicated and emotional. They often lead to litigation when the business partners cannot find a resolution on their own. Below are a few examples of potential conflicts.
Issues with contributions
First and foremost, when partners start a new business, they need to be very clear about what they are each expected to contribute. Are they directly investing their own money in the business? How much time and effort are they going to have to contribute? Never make assumptions about these key details.
Splitting up earnings
The division of revenue or profits can also lead to conflict. One business partner may accuse the other of misappropriating company funds for their own use. There could also just be conflicts about how much each person expects to take as a wage or a salary.
Dividing ownership percentages
Finally, the contributions that business partners make to the business sometimes help define their ownership percentages. It is important to address how much of the business each person owns. If the partners decide to sell the business in the future, they need to know exactly what percentage of the proceeds to expect. Ownership percentages can also dramatically affect how partners make decisions about the future of the company.
When conflicts over decision-making, ownership rights or financial contributions do lead to litigation, business partners must understand their legal options.
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