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Top 3 reasons for partnership disputes

| Feb 15, 2020 | Firm News |

No one wants to enter into a dispute. In fact, humans tend to avoid conflict whenever possible. But in business, disagreements, misunderstandings and disputes become more common when a company is growing or under stress. There are many reasons that business partners may disagree. The most common are:

  1. One partner is not fulfilling their obligation: This can be in regard to sweat equity, profit sharing, debts or how assets are used.
  2. Partners have different ideas on how money should be spent for the business: Partners may have different ideas about advertising and marketing, staff and office/business space.
  3. Partners do not see eye-to-eye on the direction the company should go: This can encompass goals as well as the company’s image or brand and the workplace culture.

Steps to take to resolve issues

In business it can be difficult to separate business decisions from personal feelings. When a small disagreement arises these three steps may help to alleviate the conflict.

  1. Take nothing personally. Remember that the goal is to run a profitable business. It can be easier to move forward with all eyes on the prize.
  2. Use the agreed-upon dispute resolution procedures set forth in your business plan. If you don’t have one, get legal help to create an operating agreement or values agreement.
  3. If the dispute cannot be quickly resolved consider pulling in a neutral third party. Enlist the help of a professional who understands business law and whose advice will be heeded.

In cases where the future of the business is at stake or where egregious actions by one partner can cause great harm to a business it’s always wise to seek legal counsel. In terms of ROI, Harvard Law school studies confirm that the money you spend up front to ensure that small conflicts do not become large ones is money well spent.

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