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For your business’ sake, avoid arguments with your partners

On Behalf of | Jul 30, 2019 | Commercial Litigation |

Partnerships come with many benefits when starting a company. Unfortunately, along with the benefits can also come disputes. Many of the conflicts will arise from differences with branding, managing philosophies, and even the direction and growth of the company. This can occur between founding partners whose personal compatibility has changed, or with new partners entering into the agreement who are too afraid to rock the boat when first entering the relationship.

Disputes can wreak havoc on business, often causing it to fail, or resulting in operational deficiencies, staff conflicts, and even confusing branding. Since disputes can cause so many problems in a business, it is always best to find ways to avoid a partnership dispute right at the beginning of your partnership relationship.

You can help minimize future partnership disputes by:

Creating an operating agreement

Once you know that the partnership is going to result in a lasting business arrangement, you need to draft a well-written operating agreement. While it may be fine to begin work in a partnership before completing an operating agreement, you shouldn’t make any major sacrificing moves without one in place. Moving cities, quitting a previous job, or selling off property are all major life-altering decisions, and you should make sure that there are compensations and protections in place before making them. If you wait, you may end up negotiating for less than you are worth as a way to justify the expense of sacrificing you already made.

Hire a personal attorney

While there are plenty of places that you can find boilerplate verbiage for an operating agreement, it is always better to have your personal attorneys draft the agreement. While this course of action can be more expensive, a lawyer will be able to tailor an operating agreement specific to your partnership needs, and also make sure that your personal interests are represented and you understand how each part of the operating agreement will affect you.

Account for worst-case scenarios

You always want to hope for the best but plan for the worst. By simply avoiding worst-case scenarios, you won’t prevent them from happening but instead won’t know how to address them when they do occur. You will want to plan for what happens in a dispute as well as what could result in the removal of a partner, or a dilution of their equity. Even if these instances seem unlikely, you will have the protocol for handling them in the event they do occur.

Allow for an outcome of “no deal”

When entering into a partnership, you have to be okay with walking away from the deal, if it does not align with your future goals or meet your required needs. By assuming that the deal will go through no matter what, you run the risk of settling without getting the most out of the partnership. Create two lists with one being what you want out of the dealer and one listing what you absolutely need to get out of it. If your absolute needs cannot be met, then walking away is likely your best options.

Don’t approach the agreement from a win-lose mentality

Everyone wants to win in life, as well as in business, but it is important to remember that you are entering into a partnership. You will need to negotiate and come to a common understanding with your partner, which means you should never make it about you winning and your partner losing when it comes to your partner. When this occurs, one partner will often feel that they have been cheated and that resentment can grow, threatening the future of the partnership.

By preparing for the possibility of business disagreements with your partners, you won’t be hoping for the worst but will be better prepared from when problems do arise. Not only can this help your partnership run more smoothly but also allow all partners to feel more secure when entering into a partnership.