Like any other relationship, business partnerships can have ups and downs. If business is booming, everyone is happy. If things aren’t going well, though, every little disagreement has the potential to turn into a major dispute. To prevent the business from suffering for it, business partners need to find a way to handle those disputes in a reasonable manner.
Is your business partnership currently facing a disagreement or a full-blown dispute? Here are four time-proven tips that may allow you to rectify the situation.
- Negotiate a Compromise
With a dispute, the first thing you should try to do is negotiate some sort of compromise. By turning to negotiation, both you and your partner acknowledge that neither of you will win the argument. Rather, you’ll commit to finding a solution that both of you can live with. This is like writing a partnership agreement while knowing what the agreement should resolve.
If you and your partner don’t want to talk with each other directly, you can communicate through your attorneys. When there’s a lot of emotion in play, an objective third party can be helpful.
- Consider Mediation
Speaking of third parties, you can also consult a professional mediator to help solve the dispute. Neutral mediators know how to facilitate healthy communication and put business partners on the path to mutual success. Mediation can help identify negative communication cycles, and get partners to define the goals necessary for their relationship to continue.
Sometimes, all it takes for a dispute to be resolved is for an outside observer to listen to each party individually. A professional mediator is the perfect person for this job.
- Execute a Buy-Sell Provision
A buy-sell provision is something your partnership agreement may present as a solution in the case of a deadlock. There are many creative ways to execute this provision, but in its simplest form, it involves one party buying the other party’s interest in the partnership. In these cases, an appraiser would assign a fair market value that the purchase price would be based on.
Of course, for this method to work, your partnership agreement would need a provision stating who can purchase the business. Otherwise, neither partner may be interested in selling.
- Opt for Dissolution
If it becomes clear that salvaging the partnership is no longer feasible, the best remaining solution may be to dissolve the business. If the partners agree to it voluntarily, the dissolution process is as simple as filing the paperwork. Beyond that, you may need to pay off creditors, sell your remaining business assets, and use the proceeds according to partnership interests.
If even agreeing to a dissolution isn’t possible, you’ll need to seek help from the court. By filing a lawsuit, you can start the judicial dissolution process and let the judge decide the case.
- Operating Agreement
Once a dispute arises, it is probably too late for the partners to agree upon an Operating Agreement. Upon the formation of the business, emphasis should be placed upon drafting and signing an Operating Agreement. Operating Agreements are generally not needed when things are going well but are a necessity when the partners disagree and cannot resolve any problems that arise amongst themselves. The Operating Agreement is the agreement the partners must consult to resolve any problems that arise. Certainly, the Operating Agreement will be the agreement a Court will look to in attempting to resolve such problems. Consult an attorney at the time the business is being formed to draft a comprehensive Operating Agreement the parties must agree to prior to formation of the business. If the parties cannot agree upon the terms to such an agreement at that time, then it is likely that it is not meant that the partners form the business.