Handling business disputes between partners

Starting a partnership can be a great way to get your business idea up and running. Working with a partner gives you the advantage of having someone else helping out and contributing to the costs and efforts involved in running a business.

However, business partnerships can also be breeding grounds for conflict, even if your partner is your best friend. Having a game plan for handling conflict and disputes over a business partnership could make the situation more manageable.

Get it in writing

A written partnership agreement acts as a roadmap for all parties. It outlines who has control over business decisions, each partner's responsibilities and compensation. Such agreements can also cover how the partnership may change or evolve over time. For example, outlining how the percentage of ownership will change if another partner comes on board in advance could make the decision to add another partner simpler. Such agreements can also include information on how the partnership can end.

It can seem awkward to discuss the dissolution of your partnership, but it is typically easier to have these conversations now while everyone has a level head than later when a dispute arises. Remember, a partnership agreement is just a tool to help your business succeed; this is your roadmap so take the time to make it great. While you can draft an agreement yourself, it can be smart to have it reviewed by an attorney before the parties sign. An attorney can spot any potential problems in the document and advise practical changes.

Settling disputes

When a dispute arises, you need to ask yourself and your partner if you can settle the dispute and continue your partnership. In cases of fraud or embezzlement that will probably not be an option. However, for small conflicts, simply attempting to talk about the problem and find common ground might do the trick. Perhaps your partner is concerned about how the business is functioning and feels the risk/reward ratio is out of balance.

It might be best to handle this outside of working hours when there are fewer distractions. You want to focus on getting to the root of the problem rather than just winning an argument. You could also ask for outside help in the form of a mediator to help settle the dispute.

It is a good practice to periodically access your goals and review your partnership agreement. If you no longer envision the same future for your business, it may be time to consider ending the partnership. To end the partnership, typically one partner must buy out the other or both partners must agree to sell to a third party. Sometimes moving on and cutting your losses is all you can do, but first attempting conflict resolution just might save your partnership.

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