Even if you have a great relationship with your business partner, disputes may be inevitable. In extreme cases, litigation may be necessary to resolve a dispute; however, there are several available alternatives to overcome a disagreement without potentially causing irreparable damage to your company’s future or your relationship with your partner.
Anticipate Disputes before They Arise
Businesses operating as registered organizations (like an LLC) are required to have “Private Rules” in place to govern their business operations. Private Rules may take the form of a partnership agreement for partnerships or LLPs, an operating agreement for LLCs, or corporate bylaws for corporations. These agreements allow business owners to take control of their operating procedures, including procedures for resolving disputes. Your Private Rules may establish a process of internal dispute resolution or require disputes to be submitted to mediation or arbitration. With these procedures in place, it is less likely that the process of dispute resolution will be uncertain, messy, or litigious.
Internal Dispute Resolution in Good Faith
You may structure your company’s Private Rules to require a good faith attempt to resolve disputes before anyone pursues legal action. Even if this step is not required, it’s a good idea to attempt to come to an agreement with your partner to avoid potentially harmful or costly court battles. It’s possible that a relationship can be salvaged by coming to a mutually beneficial agreement, by re-negotiating your initial ownership arrangement, or by revising the terms of your partnership or operating agreement.
Work with a Mediator
In many cases, conflicts are caused by miscommunication or a total lack of communication. Conflicts may be exacerbated when parties refuse to engage in private talks. A mediator’s primary role in business disputes is to facilitate conversation between the parties. With the help of a mediator, you and you partner can attempt to come to a resolution without unnecessary emotion or the adversarial conflict of litigation. In addition, mediation is more likely to produce a mutually beneficial result, rather than declaring a winner and a loser.
End the Relationship Amicably
After private talks or working with a mediator, it may become apparent that no resolution will be made. In this situation, the best option may be to part ways in an amicable fashion. Often a partnership or operating agreement will provide procedures for a partner leaving the business, or for dissolving the business altogether. These procedures may allow you to sell your stake in the company or to purchase your partner’s stake, or otherwise part ways without significant damage to your business.
Arnett Law Group
Resolving a dispute with a partner may save time, money, and the future of your business. Whether you choose to do so through mediation, litigation, or other means, creating a permanent solution to a problem may prevent future conflicts from arising.
At Arnett Law Group, we recognize that a small business is like a family. Ending a partnership may feel like a divorce, and it may have destructive consequences for your small business. We work with small businesses and their owners to promote, protect, and develop businesses to grow and thrive. Part of that work is to ensure that your small business is not put in jeopardy by quarrels between partners. This can be avoided by having a properly drafted partnership or operating agreement which structures the business to allow for growth and change, along with the advice and assistance of an experienced business law attorney found at www.arnettlawgroup.com.