5 Ways to Avoid and Resolve Partnership Disputes

A partnership is a great business opportunity.  It means you will have twice as much support behind the business than you would in a sole proprietorship, but you will still enjoy all of the benefits of a smaller company.  But even though only two people will be at the helm, making it easier to move forward with decisions and compromise on ideas, disputes can still arise.

What are five ways you can avoid and resolve business partnership disputes efficiently and effectively?

  1. Create a Detailed Written Agreement

One of the first things you should do when you decide to launch a partnership with someone is to establish a written agreement.  It might be in the form of a partnership agreement or an operating agreement, but in either case, it will put into writing the terms of your partnership.

The agreement should include at least:

  • The role of each partner
  • The amount of control of each partner
  • Each partner’s duties and obligations
  • Details about capital contributions
  • How additional capital will be handled
  • Compensation and distributions
  • The decision-making procedures of the business
  • How worst-case scenarios will be addressed
  • Why and how the agreement can be terminated

Your written agreement should be details to avoid anything that is not clear leading to a dispute in the future.  It is impossible to plan for every scenario, but the more you have planned for the better.  In some cases addressing these issues can be uncomfortable, but doing so will help you avoid an even more uncomfortable scenario down the road.

  1. Discuss the Partnership Agreement and Other Issues with an Attorney

You can develop your own written agreement without anyone else’s assistance when launching a business if you so choose, but it is always best to have an attorney review it before it is finalized.  Every business is different and it is always smart to have a professional give you guidance right from the very beginning.

  1. Deal with Disputes in an Efficient Manner

Should a dispute arise as it often does in business, it is important to set aside time to discuss the issue in a solutions-oriented productive manner.  The earlier you can resolve problems the better off you are and the more likely you are to avoid the issue escalating.  Set aside any desire you have to win a disagreement and focus on the outcome you both want to achieve.  Business partners both have the same goal – to operate a successful business.  It’s the process of doing this that usually causes disputes, but if you keep in mind you are both focused on the same outcome ultimately, it can make compromise easier.

  1. Contact a Mediator

Should a dispute not be resolved with our efforts alone, it is best to reach out to a third-party neutral that can help you with more productive efforts.  It does not mean that either side is relenting, but instead, that you need assistance negotiating the best possible outcome.  Working with a mediator at this point prevents a partnership dispute from becoming expensive, time-consuming, and damaging to your business.

  1. Consult an Attorney

If mediation fails, you will be forced to contact an attorney.  Doing so sooner rather than later ensures your interests are protected and you are able to move forward as quickly as possible.

If you would like information about resolving partnership disputes, contact Francis Carter.


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