A partnership can be an ideal structure for your Indiana business. Forming a partnership is relatively easy. Your business will have more capital and you will have the knowledge and experience that an extra person will bring.
However, disputes arise in even the best of partnerships. You and your partner are not always going to agree on everything and it is important to know the best ways for resolution. Conflicts can hinder your business operations and threaten the life of your business.
Talk to your partner
Lack of communication is the cause of many disputes and the inability for resolution. Talk with your partner and be honest about the situation. Refusing to discuss a topic often leads to misunderstandings and distrust.
Sometimes a partnership dispute is resolved by simply scheduling time to talk and work through the issue. Always treat your partner with respect and focus on the facts. Do not get emotional. Find common ground. Listen to your partner's side without interrupting or judging.
If your conversation resolves the dispute, consider making regular or more frequent meetings a priority. This can reduce the chance of a conflict occurring again that could have been prevented through regular meetings.
Review and revise your partnership agreement
Depending on the nature of the dispute, you may want to review your partnership agreement and revise any terms if necessary. Business partnerships should be formalized with a partnership agreement.
The purpose of a partnership agreement is to make sure all partners understand their rights and responsibilities. Your partnership agreement may have a dispute resolution clause outlining the steps to take if a dispute occurs.
For example, your dispute resolution clause could state that disputes will be resolved through mediation or arbitration. If your conversation with your partner does not resolve the dispute, follow the arbitration clause in your partnership agreement.
Have an exit strategy
Although no one wants to consider ending a business as an option to a dispute, a solid exit strategy is necessary. An exit strategy built into a partnership agreement can save everyone time and money.
Your exit strategy might include what circumstances will allow a partner to leave, such as retirement or simply wanting to move on from the business. It should include a valuation method stating how the business will be valued and the terms of any buy-sell agreements, such as one partner buying out the others shares.
Remember that your goal is not to "win" but to find a resolution that everyone can live with and that is in the best interest of your business. All negotiations involve some kind of compromise. These strategies can help you overcome disputes and keep your business running smoothly.
Know when litigation is the answer
Sometimes no matter what strategies you employ, a partnership dispute cannot be resolved. Or perhaps the situation involves a serious matter, such as a breach of fiduciary duty or fraud. In these situations, litigation might be the smartest option.
Before you initiate legal action, it is best to review the situation with a professional to assess all options and develop an action plan.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
