Business partners owe each other specific fiduciary duties, such as the duties of loyalty and good faith. This means that they cannot use the business’s property for their personal benefit, promote a competing business, or conceal material facts about the company. Unfortunately, even though business partners are legally required to fulfill these duties, many still fail to do so, which can have devastating consequences for the fate of the partnership as a whole.
Because there is so much at stake for business partners, it is critical for those who are considering forming a business relationship with another person to create a strong partnership. Failing to build a strong partnership can have serious consequences down the road, including dissolution of the business, significant debt, and lengthy legal battles, so if you are interested in the process of business formation, it is important to speak with an experienced business law attorney who can protect your interests.
What are the Elements of a Strong Partnership?
Every partnership is different because each involves unique individuals who bring their own outlook and experiences to the table. However, there are some basic elements common to all successful partnerships. First and foremost, it is critical to carefully consider the choice of partner before entering into any legally binding contracts. Forming a partnership with someone who is not as committed to the enterprise or who has a much different vision for the future of the company can quickly lead to contention and financial difficulties. Other important aspects of a strong partnership include the following:
- Trust, especially in regards to business dealings and relationships with clients;
- Loyalty to the company and its mission;
- Respect, which includes a willingness to communicate with the other partners;
- Focusing on reaching solutions rather than contention and disagreements;
- Open communication regarding all aspects of the business relationship;
- A willingness to compromise, which is especially important when business partners have creative differences; and
- Honesty, especially in regards to the partners’ visions for the company, business strategy, and overall business plan.
Although these elements may seem obvious, they are the foundation of any successful partnership and a failure to implement them can lead to financial difficulties and legal problems.
What are the Consequences of Failing to Form a Strong Partnership?
Although business partners owe each other certain fiduciary duties, these obligations are often breached. This in turn can lead to conflict that is extremely harmful to a company’s reputation, finances, and growth. Many people assume that all partnership disputes stem from personal conflicts between two or more partners. The reality is that while some partnerships are tested by personal issues between individuals, most partnership disputes are the result of one of the following actions:
- Fraudulent activity;
- One partner’s breach of contract;
- The misappropriation of business opportunities or profits;
- Disagreement about how assets will be divided upon dissolution;
- Lost business opportunities;
- Opposing visions for the future of the company;
- Embezzlement; and
- Interference with a contract for personal gain.
When business partners are involved in disputes over these kinds of issues, they may be required to go through the process of mediation, which saves the parties from having to pay court costs. However, medication can also be extremely time-consuming and leave both parties frustrated and unsatisfied. Eventually, the partners may find that it is in their best interests to dissolve the company, which can be a relatively simple process for those who are on good terms and agree on how assets should be distributed. When there is disagreement about these or other dissolution-related issues, one of the parties may be forced to file a lawsuit in court. While this may eventually resolve the partners’ problems, it also takes the fate of the company out of the hands of the partners themselves. Furthermore, these types of court cases can drag on for years, costing all of the partners time and money.
Schedule a Consultation With an Experienced Florida Business Law Attorney Today
Ultimately, taking certain steps prior to entering into a partnership and ensuring that a partnership remains strong can help avoid costly and stressful problems down the road, so if you are considering entering into a partnership or have already formed one and have questions about the fiduciary duties owed by you or your partner, please contact Clearwater Business Law at (727) 785-5100 to speak with an experienced business law attorney who can evaluate your case and explain your legal options. You can also reach a member of our legal team by sending us a message containing your contact information and a brief description of your case.