Business litigation often stems from disputes between two different business entities, but it is also possible for it to be an internal problem. This is common with business partnerships. Business partners often run into disputes that may not be able to be resolved without going through some form of litigation, especially if one of them alleges that significant financial harm has been caused.
How do these business disputes take place? While every case is unique, here are three common causes of disputes.
Financial conflict
Issues regarding money are very common, such as one business partner claiming that the other has misappropriated business assets. This can lead to a complete breakdown in trust. If one partner has been taking business assets for personal gain, they have harmed not only their partner, but the company itself.
Decision-making power
Litigation also sometimes stems from who has the ability to make unilateral decisions and when the business partners have to work together. This could be an issue if one partner agrees to a merger, for example, without consulting the other. They may not have the legal authority to make these types of decisions on their own.
Ownership percentages
Often, disputes arise over exactly what percentage of the business each person owns. If there is no partnership agreement in place, for instance, both partners may assume that they own 50% of the company. But clearly defining this upfront is important when voting on key business decisions, selling the company, bringing on other partners, applying for financing and taking other key steps.
When these disputes do lead to litigation, those involved must be well aware of the legal options at their disposal.