Assets and drawings
Owning property in common or sharing a gross return does not of itself create a partnership; though sharing net profits is evidence of a partnership.
How the capital of the partnership; the property owned by the partnership and its profits and losses are dealt with is unsurprisingly common causes of dispute.
In the absence of a written agreement, all partners are entitled to share equally in the profits of the business and must contribute equally towards the losses, whether in capital or income. In practice, that does not cover the myriad of different situations that arise in partnerships. Where, for example, new partners have joined, or various capital contributions have been put in place disputes can often occur.
The desired retirement of a partner and/or succession planning is a common cause of the issue. A partner can retire by their own volition; however, its consequence upon a partnership again either under a written agreement or in the absence of a written agreement can be drastic.
This can often be the case as a new partner does not as a result of admission usually take on the liability for anything done before admission.
A partnership will have existing liabilities, and there can be significant disputes over the scope of liabilities taken on and the liability of the new partner for those.
In short, whether it be the scope of a partnership; its unplanned or undocumented effects; the objective of the partnership; how it will distribute profits; can all be the cause of disputes.
Alternatively, a partnership dispute can often arise because partners have a general breakdown over the running of the business and how it can go forward; and the unique characteristics of partnerships can lead to drastic consequences for partners once a dispute takes hold.
Our expertise covers both the management of partnership disputes but also how to avoid them. Either avoiding a dispute moving to litigation; or the quick and early resolution without harm to a business can be critical to the partnership's survival, and our expertise covers that.