Business partnerships have multiple benefits, from access to adequate capital to diverse perspectives and shared expertise and resources. However, a successful partnership requires effective communication, trust, and mutual respect to achieve the set goals and objectives.
Unfortunately, disagreements are common in many partnerships due to communication breakdowns or inevitable differences in opinions or perspectives on the best direction for the business. Partnership disagreements can lead to conflicts that can strain partner relationships, reducing the strength of the business. Here are a few tips on how to avoid business disputes with a partner:
Creating a detailed partnership agreement is paramount in establishing a solid foundation for your business partnership. This agreement serves as a valuable blueprint for a successful business relationship.
The partnership agreement can have a variety of provisions, including an outline of the terms and conditions, investment contributions, profit-sharing, and dispute-resolution mechanisms. It should also clarify decision-making authority, establish exit strategies, and protect the interest of each partner.
For clarity, this type of agreement may go by several names depending on the type of entity you and your partner have selected: operating agreements govern LLCs, shareholder agreements govern corporations, and partnership agreements govern general or limited partnerships. All three of these are sometimes colloquially referred to as a “buy-sell” agreement, but in reality a “buy-sell” agreement refers to the transfer provisions that are a component of a more encompassing partnership agreement.
Plan on disagreeing. A solid foundation built on a clear establishment of duties and responsibilities is essential in avoiding misunderstandings and conflicts in any business partnership. Take time to discuss and document the duties and expectations of each partner, which can then be formalized in your partnership agreement Having regular meetings and exchange of pertinent information such as financials, major contracts or other material issues (whether good or bad) is critical and builds trust in any business relationship.
Remaining professional even when disagreeing with your business partner is crucial for maintaining a healthy working relationship. How you interact with fellow business partners, customers, and employees has a significant impact on the overall success of your partnership.
Professionalism during disagreements can help preserve trust and respect and avoid damaging the partnership’s reputation. When disputes arise, remain professional and approach the issue courteously to allow for objective decision-making.
Alternative dispute resolution techniques, such as mediation, offer many benefits when dealing with partnership conflicts. If you cannot resolve a partnership conflict internally, consider the help of a mediator.
A mediator is an impartial third party who facilitates the mediation process between two or more parties involved in a dispute. The mediator will listen to each partner’s thoughts and help you find a solution. A mediator helps create a safe and respectful environment where all partners feel comfortable expressing their concerns without fear of judgment.
A business attorney can play an essential role in helping you navigate partnership conflicts. They provide legal support tailored to your specific situation. An experienced attorney can review your agreement and advise on your legal options for a partnership buyout.
If you need the service of a business attorney in Charleston, contact Buxton & Collie, LLC, for a consultation to get started. Our attorneys will help you navigate the conflict resolution process proactively. They will also work with you to draft a partnership agreement that works for you and your fellow partners.