When partnership agreements go wrong

When two or more companies have similar goals and objectives, rather than competing with one another, they can combine forces and achieve those goals together. In business, this is referred to as a partnership agreement.

Partnership agreements can be beneficial as companies can pool resources and talent to achieve mutual goals. Objectives can be reached much more efficiently. With that being said, partnership agreements aren’t guaranteed to work. Disputes can occur in the following ways.

Financial disputes

For a partnership agreement to work, all parties have to feel like they are benefiting financially. This means that investments have to be carefully thought through as well as future profit shares. If one party feels like they are investing more than their fair share, with little chance of recuperating that money, then the partnership agreement can go south quite quickly.

Disputes over control

A partnership agreement often involves two or more powerful companies combining forces. Powerful companies are typically run by strong characters who want to take charge. Who is going to be in charge of the new project? Will there be a voting system so that everyone has a say on important issues?

These matters should be clearly expressed in a partnership agreement agreement. This is a legally binding contract that outlines the rights, obligations and roles of all parties.

A partnership agreement can be a profitable business move. Nonetheless, this largely depends on the terms of the agreement. We help business owners to assess legal risks before committing to binding agreements. Contact us today to arrange a consultation.