How Do You Resolve a Partnership Dispute?

If your business has a partnership structure, at some point you will likely encounter some type of disagreement. Remember, the value of your partnership is in what each party brings to the table. Unfortunately, there are situations where partners encounter issues like differences in judgment and even deep-seated conflicts that may threaten the entire existence of the partnership and business.

When facing this type of disagreement, it may be smart to look for a compromise rather than immediately pursuing legal action.

However, each partnership is unique, so it’s necessary to determine what resolution best suits your situation. The good news is that an attorney can help you with this decision. Seeking legal representation early in the stages of your partnership is something that will pay off in the long run. It provides you with trusted, experienced legal services that can offer advice and guidance throughout the life of the partnership. While this comes at a cost, most agree it is more than worth it.

How Do You Resolve a Partnership Dispute?

If you wonder what to do when business partners cannot agree, it’s important to mention that Lusk Law, LLC is always ready to help. While this is true, there are some steps you can take that don’t involve legal intervention or litigation. Some of these are discussed below.

Implement a Partnership Agreement

A partnership agreement is one of the best ways to handle disputes before they become serious problems. It also means that everyone remains level-headed and friendly.

It’s a good idea to seek legal guidance when creating this partnership agreement, because if something goes wrong or if a disagreement occurs, this document will be used as the basis to resolve disputes. Without a partnership agreement in place, the situation may have to be resolved in court.

When it comes to figuring out how to settle disputes between business partners, this is one of the best preventative steps you can take.

What Does the Agreement Include?

Partnership agreements should outline all partners’ responsibilities and roles in the business. It will also state who has the final authority over certain decisions. Some of the other elements that are defined and outlined in a partnership agreement include:

  • Who makes what capital contributions?
  • How are profits to be divided?
  • Who owns the intellectual property?
  • Does the partner who owns the intellectual property have a license to use it?

Common problems between partners involve bookkeeping issues. It’s essential that all business partners have access to information related to expenditures and income. The partners may decide whether only one partner or multiple partners should have control over the funds.

Worst-Case Scenario Stipulations

Are you wondering, “what are the best ways to resolve a partnership dispute?” If so, the partnership agreement can outline this, too. It is a great way to resolve issues before they occur.

For example, what would happen if one person died or became incapacitated? What about if one partner wanted to buy out the other? If there is an argument regarding where the company is going, how would you dissolve the partnership, and what circumstances would apply to this?

While it’s impossible to account for all potential situations, you can specify what should happen when certain problems arise.

Negotiating a Compromise

If you are faced with an issue that hasn’t been covered in the partnership agreement, or if you don’t have one in place, it’s still possible to negotiate a compromise for the situation. It’s worth mentioning that negotiating isn’t all about winning the argument. In most cases, the disagreements will be beyond that point.

Instead, negotiating is about finding a solution all the partners can live with. It’s like creating a partnership agreement when you know what issue must be resolved. You don’t have to go through the negotiating process alone. In fact, having legal representation with you may be beneficial.

This is especially true if you are dealing with a breach of contract by one of the partners.

Mediation

If negotiations aren’t providing the desired results, then mediation may be needed. One option is informal mediation; however, it may be better to choose a professional or neutral arbiter. This will be someone who makes a decision on the situation, and it is binding.

If you choose to hire a professional mediator, you will have to pay for the mediator’s assistance; however, for many partnerships, it may be worth it. The mediator can assist the partners to reach a resolution that all parties can live with, even if it is not exactly what they wanted and avoid the time and expense of litigation.

Dissolution of the Partnership

For situations where no agreement can be reached, it may be time to consider dissolving the partnership. This can also cause issues and require things like negotiation, mediation, and in some cases, litigation.

Litigation

While most people use this as a last resort, it is often required. You should not wait to talk to an attorney until you decide to take this step. Having a quality, experienced lawyer each step of the way will help you make smart decisions and avoid any potential issues that may arise.

Advocates For Life’s Obstacles and Opportunities

When you form a partnership, you likely have all the best intentions. In the beginning, you and your partner may even have the same goals and ideas for the business.

As time passes, though, and things change, so can your view on the business, how it should be run, and other important factors. This is when disagreements may occur. While disagreements are going to happen in a partnership, there are steps you can take to resolve them without going to court; however, in some cases, litigation will be necessary.

At Lusk Law, LLC, we understand the complex business relationship you will have with a partner or partners. We have worked with many clients in the same situation and can help you make the best decisions for the long-term success of your business. We represent clients in and around Frederick, MD, and are ready to help you achieve a resolution for your situation. The first step is to get in touch.

Attorney Rebekah Damen Lusk

Attorney Rebekah LuskRebekah Damen Lusk is the Owner at Lusk Law, LLC. Rebekah brings personal experiences as a small business owner, real estate investor and landlord to the task of practicing law and working with clients. Her practice includes civil litigation, business, employment, landlord/tenant, real estate, family, equine and animal law. [ Attorney Bio ]

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