Partnerships are the backbone of many small businesses in New York. When they work well, they provide a shared vision, resources, and opportunities for growth. But when disagreements arise, they can strain relationships and put the business itself at risk. Disputes over finances, responsibilities, or future direction are common, and without a plan, they can quickly escalate out of control. Knowing the legal strategies available to handle partnership disputes can help small business owners protect both their interests and the future of their company.
Why Partnership Disputes Arise
Even strong business relationships can run into conflict. Common triggers include:
- Disagreements over profit distribution.
- Unequal workloads or contributions.
- Disputes over management decisions.
- Differing visions for the business’s future.
For small businesses, where partners often have overlapping roles, these issues can be both personal and professional. Left unresolved, they can damage the business’s operations and reputation.
Reviewing the Partnership Agreement
The first step in resolving disputes is often returning to the partnership agreement. This document should outline:
- Ownership percentages.
- Rights and responsibilities of each partner.
- Procedures for resolving disagreements.
- Exit strategies if one partner wants to leave.
When drafted clearly, a partnership agreement can serve as a roadmap through conflict. However, when agreements are vague or absent, disputes often escalate into legal battles.
Negotiation and Mediation
Not every dispute requires litigation. Negotiation and mediation are practical tools for small businesses, enabling partners to resolve disagreements with the assistance of neutral third parties. Mediation can preserve business relationships, reduce costs, and keep disputes private. For small businesses where reputations and customer relationships are central, these strategies often provide the best balance of fairness and efficiency.
Arbitration as a Middle Ground
Arbitration offers a more formal process than mediation, but it avoids the delays associated with the court. An arbitrator’s decision is usually binding, giving finality to disputes. Many partnership agreements include arbitration clauses for this reason. For small businesses that want to avoid lengthy litigation but still need a clear resolution, arbitration can be a valuable option.
When Litigation Becomes Necessary
Some disputes cannot be resolved outside of court. In these cases, litigation may be required to protect the business or an individual partner’s rights. Common litigation scenarios include:
- Allegations of breach of fiduciary duty.
- Misappropriation of business funds.
- Fraud or misconduct.
- Deadlock that prevents the business from moving forward.
Litigation is disruptive, but it can also be the only way to safeguard investments and enforce legal obligations.
Protect Your Small Business Partnership Today
Partnership disputes can threaten the future of a small business, but with the right legal strategies, you can protect what you’ve built. At Kohan Law Group, we understand how disruptive partnership disputes can be for small businesses. Our attorneys combine individualized attention with the resources of a seasoned litigation team.Â
Whether the issue involves breach of fiduciary duty, mismanagement, or disagreements over ownership, we provide practical strategies to resolve disputes efficiently and effectively. Contact us today to discuss your situation.