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Three tips for avoiding a partnership dispute

The world of business is an inherently competitive arena. Even when two parties come together for a mutual benefit, it’s not unusual to have dueling visions about what’s best for the enterprise. These types of disagreements can often form the crux of a partnership dispute, and when that type of conflict goes unresolved it can escalate into costly litigation.

Avoiding a partnership dispute should be a goal for any business owner. For a joint venture to succeed, the co-founders need to be aligned on its essential business operations. If a dispute is bubbling underneath the surface, it’s usually a matter of time before it erupts, so taking measures to prevent that occurrence can be prudent.

Knowing how to facilitate a healthy business partnership is the first step to averting potential friction. Here are three ways to avoid a partnership dispute:

1. Have a signed operating agreement in place.

An operating agreement is an essential place for a partnership to start. Having a document that outlines each partner’s compensation and protections at the outset can help to avoid any misunderstandings down the road. This agreement should also have a detailed explanation of each party’s role in the business.

It’s important that an operating agreement also takes into account how these items will change as the business grows. Looking toward the future now could quell any later dissatisfaction if the venture flourishes.

2. Don’t be afraid to discuss worst-case scenarios.

Communication is the key to any successful partnership. Before signing an operating agreement, each party should address what would happen in the event of some common worst-case scenarios. Obviously, these aren’t fun conversations to have, but a responsible business owner should always be looking to protect their interests.

If an individual is entering a partnership, they may want to ask a few initial questions like:

  • Can they be ousted by the co-founder?
  • What would happen in the event of a particularly bad conflict?
  • Would their equity percentage change if the other co-founder invested additional funds into the business?

3. Have your own personal attorney.

Approaching an operating agreement without an attorney can be a gamble. If someone is entering a business partnership as a career move, then there is a lot on the line when said document starts taking shape. It’s important to recognize that early missteps can lead to costly problems later on, and going it alone could leave someone more vulnerable to such mistakes.

Having the guidance of experienced business litigation attorney could be helpful in establishing the right protections. If an individual’s livelihood is dependent on their venture’s success, the room left to risk should be marginal at most.

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