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Reasons to terminate a business partnership 

On Behalf of | Nov 8, 2022 | Business & Commercial Law |

Getting into a business partnership can be an exciting undertaking for any entrepreneur. If you get it right, a partnership can help the parties bring their resources and talents together, expand their production and market base and grow their bottom line. 

But what happens if the partnership isn’t working out? A business partnership can be terminated for a variety of reasons. Here are some of the most common:

1. Gross misconduct

Every business partnership is regulated by some form of the partnership contract. This contract is legally binding and enforceable. If one party violates the partnership contract, thus, leading to losses (financial or other losses), then one of the decisions you might consider is expelling the partner in question. 

However, if the violation is too gross to remedy, then you may consider dissolving the partnership altogether. And as dissolve the partnership, you may pursue the liable party for damages. 

2. Business conflicts

Conflicts are bound to arise during the course of the partnership. While most conflicts are resolved through mediation or other conflict resolution mechanisms outlined in the partnership agreement, others may jeopardize the partnership. 

If you cannot resolve the disputes, then you may have no choice but to dissolve the partnership. Some of the conflicts that may necessitate partnership dissolution include conflicts of interest, theft and misappropriation of business funds. 

3. Unmet expectations

Before getting into a partnership, it makes sense to set your expectations. Unfortunately, most potential partners overlook this discussion before taking the plunge. 

Subjects like how the business will be run, each partner’s roles and responsibilities as well as how profits and losses will be shared should be clearly discussed and covered in the partnership agreement. However, if these discussions are not held and recorded, then disagreements might arise that may lead to the dissolution of the partnership agreement. 

People get into a business partnership for a variety of reasons. Find out how you can safeguard your rights and interests while entering into a business partnership.