Reduce the Risk of Partnership Disputes By Following These Tips

 Posted on April 17,2023 in Business Formation

As the old saying goes: two heads are better than one. This is just one of the reasons that business partnerships are often an effective means of building a successful company. Partnerships offer a range of benefits, from having access to additional knowledge and skills to splitting responsibilities. Unfortunately, business partnerships can also lead to substantial conflict. When partners do not see eye to eye regarding the business, serious disputes that threaten the stability of the company can arise.

There is no way to guarantee that a business partnership will be free of any conflict or disagreements. However, partners can take certain steps to reduce the chances of a partnership dispute.

Start With a Detailed Partnership Agreement

For many entrepreneurs and hopeful business owners, the excitement of starting a new partnership may overshadow some of the more practical steps involved with creating a partnership. Although it may seem tedious and sometimes uncomfortable, building a detailed partnership agreement is one of the best things you can do to avoid conflict. Do not assume that you and the other partners will simply work out the details as you go along. This strategy almost never works. 

Create a partnership agreement that clearly explains:

• Each partner’s share of ownership

• Partner compensation and how distributions will be handled

• Each partner’s duties and responsibilities within in the company

• Each partner’s capital contributions

• The exit strategy if a partner leaves the company

• How any conflict between partners will be resolved

• Circumstances that can lead to the termination of the partnership

Make Sure Everyone Understands Their Role in the Company

One of the greatest advantages of being involved in a partnership is that you benefit from each partner’s unique perspective, experience, and personality. One partner in your company may be a dreamer who looks at the big picture and plans for the future. Another partner may be practical, instead focusing on business operations and real-world solutions to the issues at hand. Take some time to consider the best way to utilize everybody's skill set to maximize the company's success. Outline exactly what each partner is responsible for and what his or her role in the company will be. When there is not enough direction as to who is responsible for what, conflicts are sure to arise.

Do Not Wait for a Dispute to Escalate Before Addressing It

For many people, especially those who are conflict-avoidant, it can be easier to sweep disagreements under the rug instead of addressing them openly. Unfortunately, disagreements rarely resolve themselves. If partners run into conflict, they should discuss the issues as soon as possible. In many cases. open and honest conversation can resolve a problem without needing to resort to litigation.  If a dispute does escalate, consult with a business law attorney as soon as possible to receive personalized guidance.

Contact our Fort Worth Business Law Attorneys

At Gonzalez Law, PLLC, we are adept at helping partners develop strong partnership agreements, shareholder agreements, and business contracts. We can help you set your business up for continued success. Our skilled team of Fort Worth partnership agreement lawyers can provide the legal support you need. Call 817-349-7330 for a confidential consultation.

Source: 

https://www.forbes.com/sites/shanerobinson/2014/02/20/how-to-avoid-a-partnership-dispute/