How to Resolve Common Disputes Between Business Partners

Business partnerships, like all interpersonal relationships, are vulnerable to the occasional disagreement. There are a few disagreements that are common in partnerships. Resolving these amicably can keep a profitable and satisfying partnership going. Heed this expert advice for partner dispute resolution–and (even better) avoiding disputes altogether.

Agree to and delineate responsibility: Who will make which types of decisions? Put this in writing as well, and amend if necessary going forward.

Hash out salaries:

Establish a division of labor, productivity and responsibility, in writing, and allocate salary accordingly, so that all feel the numbers are fair. If responsibilities change, and one partner begins doing more work, revisit the salary issue (or re-allocate operational duties) and amend in writing. Operational issues that go unresolved can lead to a dissolution of the partnership. Alternatively, you could bring in more partners to further divide work and/or vote on decision making. You might also retire one partner to shareholder only—or go to court to resolve your dispute.

Keep finances transparent:

Avoid opaque finances, even if you’d rather let the designated partner handle it completely. Partners not actively involved in day-to-day money management and spending often begin to suspect they’re missing something. (And they may be correct.) Avoid this problem altogether by requiring expense approvals on everything, before funds are paid out. Before approving each item, be sure to ask questions of your partner (or justify the expenditure clearly to your partner if you are handling the funds). Profit and shareholder disbursements should be outlines in your LLC partnership agreement (or corporate by-laws) to avoid disputes.

Protect the IP:

If you’ve brought in the intellectual property for this business venture, be certain it doesn’t end up shifting to “company property.” You should document your ownership and license the IP to the partnership or corporation. Create rules in your partnership documents by which the IP owner can/will revoke the license.

Do due diligence:

Before partnering with someone (or with another company), check their background –and also make sure you enjoy (or can manage) working with them. Audit the state of a business (look at the books, visit the location) and find out if operations are smooth (ask around–talk to staff members, read trade papers, etc.) For an individual partner, check background and reputation thoroughly and to your complete satisfaction.

NOTE: This blog post does not constitute legal advice: every situation is unique and state laws vary. Be sure to seek legal advice about your specific situation.

For more information, contact Oakwood Commercial Capital Group.

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