Disputes involving business partnerships
A partnership dispute is a disagreement between business partners which can occur for a myriad of reasons.
Unlike for companies and directors, there is no legal separation between the partner and the partnership, which share both liabilities and profits.
A partnership dispute can disrupt a partnership’s and business’ income-earning capacity, as well as harm their reputation, so any partnership dispute should be resolved quickly and effectively — and that’s where Gibbs Wright Litigation Lawyers can help.
What is a partnership?
A partnership is a contractual business relationship in which two or more people operate as co-owners and equally share the profits and liabilities generated by the business. Each partner is responsible for the actions of the other partner(s). In Queensland, partnerships are governed by the Partnership Act 1891 (Qld) (the Act).
A partnership is comparatively easy and inexpensive to set up and has minimal reporting requirements. A partnership tax return is lodged each year, with each partner paying tax on their share of the partnership’s income.
Advantages of a partnership
- collected capital available for the business;
- greater borrowing capacity;
- limited external regulation;
- partners’ business affairs remaining private; and
- a legal structure that can be varied easily if circumstances change.
While there are advantages to partnerships, the fact that each partner in a general partnership is “jointly and severally liable” for the partnership’s debts creates the potential for disputes.
Looking to resolve a partnership dispute?
At Gibbs Wright Litigation Lawyers, we offer an initial no-cost, obligation-free consultation to help you understand your options. We’re here to fight for you.
Partnership duties and responsibilities
Business partners owe a fiduciary duty to each other, based on:
- trust; and
This duty means that each partner must act in the best interests of both the partnership and the other partners, including by:
- making full disclosure of relevant matter to the other partners;
- not competing with the partnership;
- not making a secret profit or commission; and
- not using partnership property for personal purposes.
The Act specifies the rules that apply to partners in areas such as business management, accounting, capital, profits and dissolution of the partnership.
Resolving a director dispute
How partnership disputes can be resolved
There are many options available in resolving disputes between business partners. These include:
When the parties negotiate a resolution without the need for formal mediation or arbitration.
When a partner puts their position in writing, setting out the issues and suggesting a resolution, with a deadline and a process to follow if no agreement is reached.
When an independent mediator is appointed to assist the parties to resolve the dispute rather than decide it.
When an arbitrator is appointed by the disputing partners or by a court, with the arbitrator making a legally binding decision.
When the parties have exhausted all options and decide that the partnership or business relationship should end, for example through a buyout or a sale to a third party
Gibbs Wright are experienced professionals who deal with dispute resolution and litigation daily. Our legal advice, negotiation and representation can help you resolve disputes between business partners.
Your partnership disputes matter
How Gibbs Wright can help
We can offer strategic legal advice on the fastest and most cost-effective way to solve your partnership disputes.
Contact Gibbs Wright for a free and confidential initial consultation to discuss your legal rights and obligations.
We are civil & commercial litigation lawyers
Why choose Gibbs Wright
There are hundreds of law firms in Queensland, but only a handful of them focus solely on litigation, and fewer still have the necessary skill and understanding to deliver commercially viable results for your matter.
At Gibbs Wright, we exclusively practice in litigation and dispute resolution, and as a client of ours, we want you to feel confident that you will receive unparalleled service and dedication for your dispute.
Our firm represents both plaintiffs and defendants across Queensland, in a wide range of litigation and dispute matters, and no case is too small, too large or too complex for our lawyers to take up the fight.
Whether you are an individual or one of Australia’s largest companies, your case deserves the same level of attention and dedication – and that is what we strive to provide to each and every client.
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Director dispute questions
Frequently asked questions
A business partnership is created when up to 20 people agree to go into business together. The agreement is usually in writing and involves partners investing money, with each partner equally sharing the profits and losses. Some partnerships must be registered with the state(s) in which they do business.
A partnership is an ongoing arrangement in which partners are jointly responsible for debts incurred.
A joint venture has two or more people, or businesses, working together while maintaining their separate businesses. This arrangement is used for a specific project and has an end date. Each party is responsible for the debts they incur.
Gibbs Wright Litigation Lawyers can offer expert advice on each type of business structure.
Yes. There are three types of business partnerships, namely general partnerships, limited partnerships and incorporated limited partnerships. Each type has its own features and requirements.
A general partnership is suitable when two or more people want to run a business together and need a simple business structure. It does not need to be registered.
A limited partnership is suitable when a business needs to raise capital, such as in real estate development, mining or film productions. It must be registered and have at least one general partner and one limited partner. General partners take on the day-to-day management of the business and have an unlimited debt liability. Limited partners play no part in the business’s management and their debt liability is limited to the amount they contributed to the partnership.
An incorporated limited partnership is suitable when a business wants to engage in venture capital projects, which are high risk but offer high returns. It is a complex arrangement which must be registered and have at least one general partner and one limited partner.
Mediation involves the parties choosing an independent mediator who assists the parties to resolve the dispute themselves rather than decide it for them. Attending mediation is usually voluntary, and the parties determine the procedure and conditions. A partnership agreement can contain a clause that states parties must attempt mediation before arbitration.
Arbitration is a more formal process that involves an independent arbitrator hearing both sides of the dispute before making a legally binding decision. The decision cannot be appealed. Arbitration compares to a court trial, with an arbitrator taking the role of the judge. An arbitration clause may be included in a partnership agreement.
A partnership does not need to be registered unless it is a limited partnership or an incorporated limited partnership.
In a limited partnership, each partner’s liability is limited to the amount of money they contribute to the partnership. Limited partners are usually passive investors and must not be involved in the day-to-day running of the business.
An incorporated limited partnership has a separate legal personality from its partners. This means limited partners are not liable for the debts of the partnership.
A partnership should have a written partnership agreement to ensure that each partner has clarity about their rights and responsibilities in the partnership.
A partnership agreement should include:
- the roles and responsibilities of each partner;
- how debts and liabilities will be managed;
- how profits and assets will be distributed;
- how any buyout will be conducted; and
- how partnership disputes will be resolved.
There are many situations in which a business partnership is dissolved, including when:
- the term specified in the partnership agreement expires;
- a partner leaves the partnership;
- a partner can no longer legally own a business;
- a court orders that the partnership be dissolved;
- a partner becomes bankrupt;
- a partner dies; or
- the business becomes bankrupt or insolvent.
A partnership agreement will usually specify the terms and conditions for dissolving the partnership, and how partnership property is to be distributed. If there is no partnership agreement, the process will be guided by the Partnership Act 1891 (Qld).
If you have a partnership dispute of any kind, call Gibbs Wright Litigation Lawyers for a free, no-obligation consultation to assess the strength of your case.
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