Forming a business partnership offers many benefits. Each partner brings a different set of skills, experiences, and perspectives while contributing to a greater pool of financial resources. While differences in outlook and experience often benefit the organization, they can also be the cause of disagreements that threaten the very existence of the partnership.
Disagreements are inevitable, and often, it’s through respectful disagreement that the best ideas are born. However, it is vital to manage differences of opinion so they don’t escalate to serious disputes. There are many ways to resolve business disputes without hurting the organization. However, it is preferable to avoid partnership disputes in the first place, and the following tips can help:
Compare Values and Goals
Most partnership disputes arise because the partners have different long-term visions for the business. In these cases, the partners often hold different values or opinions that influence how they view life and business. It is crucial that partners compare their views on key business issues and then work together to create a written values statement. This joint agreement should include:
- The leadership style that the partners will employ
- The type of growth strategy that the business will utilize
- The kind of company culture and work environment that the partners want to foster
Agreeing on these matters early on will allow current and prospective partners to be on the same page at the most fundamental level of the business.
Openly Discuss the Worst Case Scenario
Running a business is not always smooth sailing. Problems are bound to arise. Therefore, it is important to consider how you will cope with operational challenges, financial losses, and difficult decisions. Although this discussion might make you uncomfortable, if done with respectful consideration and collaboration, it can prove very useful. A conversation about potential problems allows the partners to agree on a plan to address them. If you do face these challenges, you will be better equipped to handle them thoughtfully and strategically.
Be Proactive
Disagreements are part of life and business. However, if left unresolved, simple disagreements can compound into serious disputes. Protracted internal fights are expensive and destructive to both efficiency and company morale. In most cases, partners can resolve disagreements soon after they arise with open, honest, and well-intentioned conversations. In some cases, it might be wise to consider other solutions, such as mediation or retaining the services of an experienced partnership dispute attorney.
Draft a Formal Partnership Agreement
Even if the law does not require you to have a formal partnership agreement, having one in place can go a long way in avoiding future disputes. Considering the importance of this agreement, it’s a good idea to work with an attorney to create a partnership agreement that is as thorough as possible. At the bare minimum, the agreement should cover:
- Division of ownership
- Capital contribution among partners
- The duties and obligations of each partner
- Compensation among partners
- Decision-making procedures
- Conflict resolution processes
- Protocol when a partner leaves the partnership
- Dissolution process and conditions
This agreement will form the foundation for how your partnership will operate and will be your go-to resource for resolving disagreements.
Final Thoughts
Working with an experienced attorney is often a wise choice when forming a new business. If you’re launching a venture with business partners, an attorney well-versed in business law can help you create a solid framework for avoiding and dealing with partnership disputes.