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7 Steps to Settle Partnership Disputes


Disagreements will inevitably arise in business partnerships. However, what matters most is that these disagreements are settled in a timely, civil and fair manner. Consulting firms offering litigation support services have helped countless business owners resolve disagreements, as well as other business-related conflicts with their business partners.


Let’s look at the best steps to take to handle potential conflicts in a business partnership:


Adopt a Partnership Agreement


A partnership agreement is the best way to avoid any business partnership conflicts from the start. The purpose of a partnership agreement is to protect each owner’s investment in the company, govern how the company will be managed, clearly define the rights and obligations of the partners, and determine the rules of engagement should a disagreement arise among the parties. Partnership agreements empower business partners to navigate potential disputes even before they arise, and easily solve disputes when they do arise. This approach is optimal, as it is proactive and created when all relevant parties are on amicable terms.


Roles and Responsibilities


The partnership agreement between you and your business partners will define each party’s unique roles and responsibilities. All the details should be written out thoroughly, including which party makes specific capital contributions, the amount of each contribution, which party has the final say over certain decisions, the division of profits, and so on. If there is intellectual property related to the business, the parties that own that intellectual property must be identified. The partnership must also have a license to use the intellectual property. Keep in mind, accounting is one of the top causes of division between business partners. Each partner should have access to information about expenditures, revenue, and all other relevant financial information.


Worst-case Scenarios


The best business partnership agreements take the worst-case scenario into account at the time they are formulated. These agreements should mention exactly what will occur if one of the business partners becomes incapacitated or passes away.


Furthermore, the agreement should detail what will happen:

  • If one partner attempts to buy out the other partner?

  • If there is a heated disagreement throughout the business's evolution?

  • If the partnership is to be dissolved?


Other potential scenarios should also be specifically addressed in the agreement, so there is minimal room for misinterpretation of the language.


Negotiate a Compromise


If something is not covered in the partnership agreement, or simply there's no such a partnership agreement to start with, and a problem arises, there is still the potential to negotiate with the other party. Consider a mutually beneficial compromise spearheaded by your legal practitioner. This way, you will spend less time worrying about the disagreement and more time focusing on your work, improving your value offering, and adding to your bottom line.


Mediation


If negotiating does not work, agreeing to mediation might prove a feasible option. Informal mediation is worth consideration. Trust in an experienced, unbiased arbiter. Mediation by an experienced arbiter can deliver an outcome that satisfies both parties. Keep in mind, the arbiter’s decision will also be legally binding, meaning you must adhere to it.


Dissolve Partnership


If partners cannot reach an agreement, you can consider dissolving the partnership. However, dissolving a partnership can be challenging, as it necessitates negotiation, potential mediation, and possibly even litigation.


Litigation


Litigation is the last possible resort. Professional legal teams consider all potential options to avoid litigation, as it can be time-consuming, costly, and frustrating.


Here at Cerberus Consulting, our team can assist you in valuing each business partner’s share in the event of a dispute. Let us review the facts of your disagreement and guide you in the case that litigation is the best route.


Our business consultants are at your service. From company valuations to litigation support, commercial real estate guidance, business restructuring, and beyond, we can help your business. Reach out to us today to learn more about our litigation support services in Alberta and schedule an initial appointment. You can contact us by dialing 587-400-3858 or by filling out our convenient online contact form.


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