How to Protect Your Business from Partnership Conflicts

A business partnership is vulnerable to many complexities, and these issues, if not resolved in time, can lead to disputes. In our previous article, we discussed some effective ways for avoiding business partnership complexities. Here, you will learn how to protect yourself and your business if and when a partnership conflict arises.

A dispute or disagreement is natural to arise when there are two or more people involved in a single business. A partnership dispute, if not resolved in time, can end up destroying your business as well as your relationship with the partner. The future of your business depends on how well you avoid and resolve these conflicts. In this article, we’ll be sharing some effective methods for the same.

Ways to avoid business partnership conflicts

1. Get A Partnership Agreement

A written partnership agreement is the best method to secure the future of your partnership against any disputes. Even if the business partner is your close friend or a relative, they wouldn’t mind signing an agreement as it protects the interests of all the involved parties. The partnership agreement must clearly define the following things:

  • Sharing of each partner in the business
  • Each partner’s role, duties, and responsibilities
  • Who is the boss, if there is one
  • How external personnel will be hired, if ever needed
  • How much is the contribution made by each partner
  • How additional capital requirements will be handled, if needed
  • Percentage of each partner in profits & losses
  • How the decision-making process will work
  • How the decisions will be made in case of disputes
  • What happens in case of a business conflict, such as removal of a partner, disagreement between two partners, dissolution of the business, etc.
  • In what conditions a legal help will be hired and how
  • Types of possible disputes and their resolution techniques

Since every possible dispute situation and its resolution methods are already mentioned in the agreement with the consult of all business partners, the chances of legal disputes are highly unlikely.

Even if a dispute leads to the court, you and your business are protected by the partnership agreement.

2. Hire an Attorney to prepare a Partnership Agreement: This makes sure that all the important things and cases are involved in the agreement, and the document is accepted by the law.

3. Make sure to discuss the conditions, terms and resolution methods with each and every partner of the business before including them in an agreement.

4. Set up a dispute resolution department within the company or hire a third-party service: This might be a good idea to get your business ready for any future partnership conflicts. Many companies have a dedicated department that is responsible for dealing with such issues. The task must be handled by a third-party person who isn’t directly involved in your business. It would be like an internal court within your organization.

Ways to resolve partnership disputes

Even after drawing a full-proof partnership agreement and doing everything else possible, sometimes, you just can’t avoid a conflict. Here’s what to do in such situations.

1. Discuss Calmly

No matter how serious the disagreement is and how much you want to get rid of the responsible partner, you must also think about the survival of the business. Try your best to discuss the matter calmly with the partner, with or without the presence of other partners as needed, to see if the conflict can be resolved somehow without actually harming the business and/or relationships.

2. Hire a Mediator

Hire a professional mediator to help you resolve the issue inside the company. A third-party person will listen to the case and arguments from both sides and can come up with a solution that is acceptable by all the parties. Make sure to keep the talks within the organization as it might negatively affect the market reputation of your company if ever get out.

3. Dissolve the Partnership

The last and ultimate method is to end the partnership or leave the business. I hope your partnership agreement has a clause for such situations. One or more partners can decide to leave the business in a friendly manner, which may still save the friendship or the relationship.

4. Hire Legal Help

If there is no way to calmly resolve the dispute, the only thing you can do is hire a legal help. This does not necessarily mean filing a legal case or anything. You first have to consult with your Attorney and try finding a friendly way out.

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