When two people decide to start a business together, it’s important for them to use a business partnership agreement. This is essentially a legal contract. It helps to define their relationship and gives them different responsibilities and obligations. This can help the business to run smoothly and may help the partners avoid a dispute.
But a dispute could still happen, perhaps when a business partner breaks that agreement. How could this occur?
Unfair financial decisions
One example is if the profits and losses in the business have been divided via the partnership agreement, but one partner doesn’t honor it. For instance, maybe revenue is supposed to be split 50-50 between both business partners, but one person has been keeping 60%.
In some cases, a partnership agreement won’t have a specified end date. But there are other cases where someone will agree to be a business partner for a set amount of time, like two or three years. If they try to break that contract early, it can have a major negative effect on the business.
Decisions and ownership percentages
Finally, the partnership agreement should specify the ownership percentages. This is key because, if either person has more than 50%, then they may have more decision-making power than the other. It’s very important for partners to know when they get to make their own decisions and when they are obligated to work with the other person to come to a joint decision.
Those who find themselves in disputes with their business partners may accuse them of violating a contract. It’s critical for those involved to understand all the legal steps they can take.