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The importance of planning ahead for partnership disputes

On Behalf of | Jan 18, 2025 | Business Law

A business partnership makes the creation or ownership of a business more accessible. Instead of trying to manage everything from financing to daily operations alone, an aspiring entrepreneur can share those responsibilities with someone else. Business partnerships have the potential to last a lifetime and can produce major benefits for both partners. However, as is the case with any interpersonal relationship, disputes between partners are all but inevitable.

Partnership conflicts arise in even the healthiest and most successful business partnerships. Those beginning a business partnership may benefit from planning ahead of time for the likelihood of future conflict.

Addressing conflict resolution in their agreement

A partnership agreement outlines the responsibilities and expectations of both partners. It may discuss plans for the business. It can also include guidelines for how the partners address disputes in the future. Frequently, partners may decide to include clauses mandating alternative dispute resolution. They agree to sit down in mediation together to work out their disagreements instead of letting temporary conflict derail their relationship or lead to civil court proceedings.

Some partnership agreements may also include important provisions for settling disputes, such as terms designating one partner as the final decision-making authority in certain areas of business operations. A thorough partnership agreement with terms that acknowledge the likelihood of future conflict can help prevent conflicts from causing long-term damage to the business.

Keeping the focus on cooperation

With exceptions for scenarios involving embezzlement and other major breaches of fiduciary duty, partners generally have to embrace the idea that conflict is likely even if they try to work cooperatively. They need to be ready to work to resolve the issue. Instead of letting their emotional reactions and personal preferences govern their responses to a disagreement with a partner, those invested in a business often need to think about their long-term needs and priorities.

Sometimes, compromising on certain issues is worthwhile to preserve an amicable working dynamic. Partners do not want to create a hostile environment that makes their workers feel anxious. Trying to minimize how much a dispute spills over into the workplace by keeping the focus on the company’s long-term success could help promote faster conflict resolution.

Particularly in cases where partners may not have planned ahead for conflict, disputes may require outside intervention to resolve. In some cases, they may even lead to business litigation. Securing support while reviewing business formation documents and partnership agreements can help people determine the right way to respond to a disagreement with a partner.