Starting a business with someone can be thrilling and tremendously rewarding – but what starts out as a dream can quickly turn into a nightmare.
Your partnership may start out with good intentions and a shared set of goals, but things can turn south very fast. So, what makes a formerly amiable partner turn to litigation? Here are the most common reasons:
1. Money troubles
It’s probably no surprise that money tops the list. Disagreements about how profits are supposed to be split, unpaid loans or one partner dipping into the company’s funds for personal use can all spark lawsuits. So can misunderstandings about who gets what or accusations of financial mismanagement.
2. Power struggles
You have to make decisions in business, but what happens when partners don’t agree? Power struggles are a major source of partnership breakdowns, especially if one partner feels left out of decisions or believes they should have more control.
3. Breach of contract
If one partner doesn’t hold up their end of the deal, things can get ugly fast. Whether it’s failing to follow through on commitments or violating the terms of the agreement outright, breaches often lead straight to court.
4. Trust issues
Fraud and misrepresentation can happen, and when one partner starts lying, hiding information or engaging in shady antics, litigation is almost inevitable.
5. Exit drama
Partnerships don’t last forever – and the failure to have a clear exit strategy can lead to disputes over buyouts, valuation of the business and timelines. Violation of non-compete agreements or confidentiality clauses can also lead to lawsuits.
Whatever the reason litigation may be on your horizon, it’s smart to seek experienced legal guidance as soon as possible.