When people want to work together for business reasons, there are different legal identities they can assume. One such identity is a partnership.
Under Ontario’s Partnership Act,1990, individuals can come together to create a partnership, which involves persons carrying on business together with a view to a profit. By joining forces to carry on business together, members of a partnership can potentially become agents of one another when it comes to business dealings and other decisions. In some unique cases, individuals who hold themselves out as partners will be liable to the partnership even if that previously was not the case.
Unfortunately, sometimes partners may dispute over the partnership, the direction of the business, or general operational matters. Disputes can relate to the profits of the partnership, administrative matters, or even allocation of resources. In some rare cases, partners can even dispute over the core existence of the partnership.
Disputes can lead to a breakdown of the partnership, and any such breakdown can be fatal to a partnership, affecting its profitability and its legal existence.
To minimize disputes as much as possible, partners should ensure they have an agreement and should discuss how to prevent future issues before they occur.
Although it is possible for a partnership to exist even if it is created under a verbal agreement, this can create a lack of clarity, which can lead to disputes and arguments over the terms of the partnership. Where the partners each have a different interpretation of the verbal agreement, it can lead to inconsistency and can also heavily disrupt day-to-day operations.
It is always helpful to have a partnership agreement in writing, and to also include language which might address dispute resolution. Such a clause could direct the partners on how to resolve disputes in a way that minimizes time, stress, cost, and the threat of litigation. A proper agreement should also address issues like resource allocation, and what to do if the partnership dissolves.
If you are considering forming a partnership, you should consult a legal professional who can properly draft a written partnership agreement to protect your interests. If you are already in a partnership, you should also ensure you understand your partnership duties and obligations.
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If you are considering forming a partnership, or have questions about a partner’s obligations, our team of experienced lawyers can help. Contact us at 1 (800) 771-7882, or email firstname.lastname@example.org and we would be happy to assist.
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