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Can you avoid a partnership dispute on the front end?

On Behalf of | Jul 7, 2023 | Firm News

A partnership can be a strong structure upon which to build your business. It can help you share the responsibility of raising capital to get your business up and running, allow you to retain a significant amount of power and decision-making authority, and streamline your operations.

While many of these partnerships play out without issues, the fact remains that these businesses are run by people who will have disagreements from time to time.

Many of these partnership disputes are able to be hashed out informally. Others are so conflictual that they threaten the viability of the business.

If you want to avoid that outcome, then you should put in work on the front end of your business’s creation to protect your business interests.

Ways you can try to avoid partnership disputes

If you want to avoid the hardships associated with a partnership dispute, then you should focus on what you can do on the front end to avoid conflict. Here are some ideas that we hope you’ll find useful:

  • Focus on values: Before entering into a partnership, it might be helpful to sit down with your prospective partners to gain a deep understanding of each other’s priorities and values. By doing so, you can identify differences that could lead to a dispute, thereby allowing you to hash them out before the partnership agreement goes into effect.
  • Be thorough in your partnership agreement: Your partnership agreement can be as detailed as you want it to be. And it’s a good idea to address as many potential issues as possible in this agreement. By taking the time necessary to think through some of these potential problems, you might save yourself a lot of headaches in the future.
  • Draft and utilize a decision matrix: A lot of partnership disputes are triggered by disagreements over key business decisions. But you can minimize the potential conflict over these decisions if you have a decision matrix that helps walk you and your partners through the decision-making process. This way you’re consistent in your approach and the outcomes are fair. In turn, this may significantly reduce the risk of a partnership dispute.
  • Clearly identify roles and authority: Although the partners in your business may share ownership, their roles don’t have to be the same or even similar. But if each partner’s role and authority is unclear, then you can see disagreements that are spurred by power struggles. So, make sure that you clearly define these roles so that each partner has a distinct understanding of where they fit into the business and how they’re expected to contribute.

What if you still end up facing a dispute?

If you still end up facing a partnership dispute, then you’re going to have to find a way to get through it. You might be able to sort it out through informal conversations, or you may need to turn to alternative dispute resolution like mediation.

However, if you suspect that a partner is operating in an illegal fashion, then taking legal action may be the only way to protect your financial interests and the viability of your business.

But suing your partner can be an uncomfortable prospect. That’s why you might be looking for a way to carefully handle your case. Learn as much about the process as possible before moving forward with your case.