Settling Partnership Disputes

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Settling Partnership Disputes
When two or more than two people decide to work together and support each other in their collective business ambitions, then their relation can be termed a partnership. Fortunately, old style partnerships are on the demise and the new ones come with proper legal protection. There are two types of partnerships, traditional simple partnerships and an LLP. An LLP, which stands for a Limited Liability Partnership, has a formal framework that limits the owner’s liability, something old fashioned partnerships don’t guarantee.

Both of them are recognized as partnerships by law. Hence, any disputes between the partners in such instances have to be settled amicably, even if it results in dissolution.

Going for Dissolution
When two partners develop differences and accept that they cannot work together, one of the partners may go ahead and bring an action against the other and ask for dissolution of the partnership agreement that exists between the two, and end the partnership. Courts are careful in awarding dissolution orders and they can grant a dissolution order in situations where:
  • They find it equitable and just to do so
  • Where the partnership has started to and will continue to make loss
  • One of the partner has acted in a prejudicial manner when carrying our his/her business duties
  • One of the partners suffers from permanent incapacity
Plausible Alternatives
Dissolution of a partnership to settle a partnership dispute is considered the most extreme step that can be taken. There is no going back from a dissolution order, and it can adversely affect the business if the timing is not right. A better way to handle partnership disputes is either to hire a mediator between the parties so that the issues can be resolved or to take the matter to arbitration to avoid negative publicity and public scrutiny that comes with an action in court.

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