When the Partnership Fractures: Navigating Disagreements in Business

Vivian Nguyen • April 26, 2025

The initial excitement of launching a business with a partner often stems from shared vision, complementary skills, and the promise of collaborative success. 

However, as the business evolves and faces the inevitable challenges, disagreements can arise. Whether it's over the division of profits, crucial management decisions, or even the future of the partnership itself, these conflicts can be incredibly disruptive and emotionally taxing.

This blog post explores some common areas of disagreement between business partners and offers insights into how these situations can be navigated. 

The Bone of Contention: Profit Sharing

Money matters, and when it comes to business partnerships, the distribution of profits is a frequent source of tension. What initially seemed like a fair arrangement might become contentious as the business grows or individual contributions shift. 

Disagreements can arise due to:


🔵 Unequal Contribution

🔵 Changing Roles

🔵 Differing Financial Needs

🔵 Lack of Clarity in the Agreement

Steering the Ship Differently: Management Decisions

Running a business requires constant decision-making, from strategic direction to day-to-day operations. Disagreements in this area can stall progress, create friction, and undermine the business's overall performance. Common points of contention include:


🔵 Strategic Direction

🔵 Operational Issues

🔵 Risk Tolerance

🔵 Work Ethic and Involvement

The Ultimate Divide: Dissolution of the Partnership

Sometimes, despite best efforts, the disagreements become irreconcilable, and the partners consider dissolving the business. This is a significant decision with complex legal and financial implications. Disagreements surrounding dissolution can involve:


🔵 The Decision to Dissolve

🔵 Valuation of the Business

🔵 Division of Assets and Liabilities

🔵 Non-Compete Agreements

Navigating the Storm: Strategies for Resolution

While disagreements are inevitable, how partners address them can determine the partnership's survival and the well-being of all involved. This is where a skilled business lawyer becomes an invaluable asset. Here's how they can help at various stages:


🔵 Interpreting the Partnership Agreement: A lawyer can meticulously review the existing partnership agreement to understand the rights and obligations of each partner, the agreed-upon dispute resolution mechanisms, and the clauses pertaining to profit sharing, management, and dissolution. This provides a legal framework for addressing the disagreement.


🔵 Facilitating Communication and Negotiation: While not acting as a mediator, a lawyer can help structure communication between partners, ensuring discussions are focused and legally sound. They can also represent their client's interests during negotiations, aiming for a fair and legally binding settlement.


🔵 Mediation and Arbitration Advocacy: If the partnership agreement specifies mediation or arbitration, a lawyer will advocate for their client's position during these processes. They can help prepare arguments, present evidence, and ensure their client's rights are protected.


🔵 Formal Dispute Resolution and Litigation: If negotiation, mediation, or arbitration fails, a lawyer can initiate or defend legal proceedings in court. They will prepare legal documents, present evidence, examine witnesses, and argue their client's case to achieve a resolution ordered by the court. This might involve seeking injunctions, specific performance of the partnership agreement, or orders for the dissolution of the partnership and the division of assets.


🔵 Advising on Fiduciary Duties: Partners owe each other fiduciary duties, meaning they must act in good faith and with the best interests of the partnership in mind. A lawyer can advise on whether a partner's actions constitute a breach of these duties and pursue legal remedies if necessary.


🔵 Guiding Through Dissolution: In the event of partnership dissolution, a lawyer can guide their client through the complex legal and financial processes involved. This includes advising on business valuation, asset division, liability allocation, and the drafting of dissolution agreements to protect their client's interests and minimise future legal risks.


🔵 Preventative Advice: Even before disagreements escalate, consulting a lawyer can be beneficial. They can advise on strategies to improve communication, update the partnership agreement to address potential areas of conflict, and implement mechanisms for smoother decision-making.


Prevention is Better Than Cure

The best way to navigate disagreements is to prevent them in the first place. A lawyer plays a crucial role in this preventative stage by drafting a comprehensive and unambiguous partnership agreement that clearly outlines all key aspects of the business relationship, including dispute resolution processes.


What should you consider?

Disagreements are an inherent part of any business partnership. While open communication and a well-defined partnership agreement are crucial first steps, the expertise of a business lawyer is often essential for navigating complex disputes effectively. 


Whether it's interpreting the existing agreement, facilitating negotiations, representing a client in formal dispute resolution, or guiding through the intricacies of dissolution, a lawyer provides the legal knowledge and strategic advocacy needed to protect their client's interests and find a path forward – whether that means salvaging the partnership or ensuring a fair and legally sound separation. 


Don't wait until a disagreement becomes a full-blown crisis; seeking legal counsel early can save significant time, money, and emotional distress.


By Maria Valenzuela April 26, 2025
Prenuptial agreements, once considered taboo, are gaining popularity among millennials as a practical and proactive way to protect their assets and clarify financial expectations in a relationship. As family lawyers we view prenups as a modern tool for couples to navigate the complexities of marriage and potential separation with greater certainty and control.
By Vivian Nguyen April 25, 2025
This blog post aims to shed light on the key aspects of contesting a will, helping you understand your rights and the steps involved. Crucially, it also serves as a vital warning to those drafting a will: seek proper legal advice, especially if you anticipate potential challenges.
By Vivian Nguyen April 21, 2025
Congratulations! You're taking the exciting leap into entrepreneurship. But before you dive headfirst into your brilliant idea, it's crucial to lay a solid legal foundation. Although it may be an upfront cost you cannot seem to afford, having the right documents in place from the start can save you significant headaches, costs, and potential legal battles down the line.
By Maria Valenzuela April 20, 2025
Business ownership adds a layer of complexity to property division, and it is crucial to take proactive steps to protect your business and ensure a fair outcome.
By Vivian Nguyen April 20, 2025
Let's break down the A to Z of conveyancing in Australia, providing a comprehensive overview of what you need to know.
By Jack Dunn April 14, 2025
Being arrested can be a frightening and confusing experience. However, understanding your rights and knowing how to navigate the process can make a significant difference with your criminal law matter. Where do the Police Powers to Arrest come from? The Police have the power to arrest you under Section 99 of the Law Enforcement (Powers and Responsibilities) Act 2002 (NSW) , commonly referred to as LEPRA. What is the basis for an arrest? In 2013, the above laws were amended to outline when a police officer could arrest you without a warrant. This is based on one or more of the following: (a) the police officer suspects on reasonable grounds that the person is committing or has committed an offence, and (b) the police officer is satisfied that the arrest is reasonably necessary for any one or more of the following reasons-- (i) to stop the person committing or repeating the offence or committing another offence, (ii) to stop the person fleeing from a police officer or from the location of the offence, (iii) to enable inquiries to be made to establish the person's identity if it cannot be readily established or if the police officer suspects on reasonable grounds that identity information provided is false, (iv) to ensure that the person appears before a court in relation to the offence, (v) to obtain property in the possession of the person that is connected with the offence, (vi) to preserve evidence of the offence or prevent the fabrication of evidence, (vii) to prevent the harassment of, or interference with, any person who may give evidence in relation to the offence, (viii) to protect the safety or welfare of any person (including the person arrested), (ix) because of the nature and seriousness of the offence. Police Officers may also arrest you if directed by another Police Officer to do so in accordance with any of the above. You should be taken to an authorised officer who either a Local Court Magistrate or Registrar of any Local Court or Children’s Court as soon as reasonably practicable. Pursuant to section 105 of LEPRA Police officers can discontinue the arrest at any time and without taking the person to the above authorised officer. The purpose of arrest is to bring the individual before the Court to answer the charge or allegation laid by the Police.
By Razeeha Reilly April 14, 2025
The Fair Work Commission (FWC) ruled in favor of an employee who wanted to change his work arrangement to care for his child. The employee, Mr. Aoyama, asked to work from home three days a week, but his employer, FLSA Holdings Pty Ltd, refused. The FWC decided that FLSA did not have good business reasons to say no to Mr. Aoyama's request and ordered the company to allow it. Mr. Aoyama had been working from home two days a week since at least July 2023. In October 2024, he asked to change his arrangement to work from home three days a week to help with childcare. The FWC agreed with Mr. Aoyama, stating that his suggestion would not hurt the company's business. This decision is important because it supports employees' right to ask for flexible work arrangements to care for their children. It also tells employers that they cannot unreasonably refuse such requests. Kent Aoyama v FLSA Holdings Pty Ltd [2025] FWC 524
By Maria Valenzuela April 14, 2025
Divorce in Australia is governed by the Family Law Act 1975 (Cth), and as family lawyers, we guide clients through this process, ensuring they understand the legal requirements and their rights.
By Andrew Pacini April 14, 2025
The body content of your post goes here. To edit this text, click on it and delete this default text and start typing your own or paste your own from a different source.
By Vivian Nguyen April 7, 2025
As a business owner, you’ve spent years building something you’re proud of. But have you thought about what happens when you’re not around to steer the ship? Whether it’s due to retirement, illness, or something unexpected, estate planning is the key to ensuring your hard work doesn’t fall apart at the seams. It’s not just about writing a will—it’s about securing the future of your business, protecting your interests, and making sure your family doesn’t get hit with unexpected tax surprises.
Show More