When business is booming, relations between you and your business partner might be fine. However, how do you deal with a dispute or breakdown when times are tough? Sometimes, the relationship between business partners might become so tenuous that breaking up is the only option. This article outlines ten steps that aim to resolve disputes between business partners, so you do not have to take legal action.

1. Plan Ahead

If you don’t have a formal partnership agreement, consider getting one. A partnership agreement should include:

  • a dispute resolution procedure to follow when you’re not in agreement;
  • the roles and responsibilities of each partner;
  • the process of handelling money; and
  • a clear guideline to follow if you wish to dissolve the partnership.

2. Go Back to the Agreement

If you have a partnership agreement, review it carefully if a dispute arises. In particular, check any dispute resolution procedures and terms or clauses that deal with the issue at hand. Relying on the agreement and your original intentions on an issue may help to reach a resolution.

If you don’t have a formal written agreement, there may be other evidence of the informal agreement between your partnership when it began. This evidence may include:

  • emails;
  • notes; or
  • any other form of correspondence (e.g. texts).

Look through these correspondences to find any information on how you both intended to handle any disputes.

3. Identify the Issues in the Dispute

If things aren’t working, take the time to step back and identify the real issues at hand. This can be hard when emotion takes over. Consider whether the dispute relates to a misunderstanding about facts and, if you think this is the case, discuss the misunderstanding with your partner. Common trouble spots for business partners include:

  • unequal division of work;
  • different visions and priorities for the company;
  • incompatible management styles; and
  • unequal financial investment and profit sharing.

4. Identify Potential Outcomes

Think about what you want out of the dispute and compare that with what a realistic outcome might be. Also, consider your priorities and goals for the business. If your partner has different priorities and expectations on an area that you’re arguing about, you’re unlikely to resolve the dispute. Have a conversation to check that you’re on the same page about the bigger picture for the business before trying to fix this particular problem.

5. Talk it Out

Once you’ve identified the key issues in the dispute, set up a meeting with your partner to discuss the problems. Try to keep emotion out of the discussion and be prepared to listen and to negotiate. Be prepared to talk beyond the dispute and review the goals and priorities of the business as a whole. Keep a written record of the items discussed and any additional issues raised or outcomes proposed.

6. Put it in Writing

If the dispute can’t be resolved through a meeting, consider putting your position in writing. A formal letter to your business partner will let you thoughtfully set out the issues and your suggestions for a potential resolution. Also, set out a deadline for a response and the next steps if you can’t reach an agreement. Any correspondence will be of assistance at a later stage if you need to take the dispute further.  

7. Get Help

Just like a marriage counsellor can save floundering marriages, a neutral third-party can help warring business partners resolve their disputes. This may be a trusted advisor who had helped at an earlier stage of the business. There are resources for business owners to get outside advice on their relationship and the operation of the business. Mediators are trained to deal with a range of dispute situations. Further, the Australian Small Business and Family Enterprise Ombudsman has a number of resources to help business owners manage disputes.  

8. Get Legal Advice

If you can’t resolve the dispute on your own or with an external mediator, consider getting legal advice. A lawyer will set out your rights and obligations in the dispute and can help avoid you having to take the matter to court.

9. Consider Breaking Up

If you cannot resolve this particular dispute and you both feel the partnership should be dissolved, you will need to reach an agreement on how that will work.

For example, will one of you buy the other partner out? Or, will both partners sell to a third party? If so, on what terms?

10. Court – The Last Resort

If you believe taking legal action against your business partner is your only option, carefully consider the broader implications of such an action. Do you have a defined goal that you hope to achieve from going to court? This might be compensation or a particular order. Don’t go in with the hope of ‘winning’ against your partner. The expense and time of litigation can be overwhelming and may also have a broader damaging effect on the business itself.

Key Takeaways

If you are having a dispute with your business partner, it is crucial to keep a handle on your emotions and try to identify the key issues. The ten previous steps provide a guideline on how best to handle any partnership disagreements. If you have any questions about resolving an issue with a business partner, contact LegalVision’s dispute resolution lawyers on 1300 544 755 or fill out the form on this page.  

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Jodie Thomson
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