Partnership disputes can be devastating for a company, sometimes leading one partner to exit or the company to be entirely dissolved. These disputes can happen for many reasons, such as:
- Lack of trust
- Financial disputes
- Disputes over ownership
- Overlapping roles and responsibilities
- Different goals and priorities
Every case is unique, and there are certainly situations in which multiple issues will lead to a dispute between business partners. One way to proactively avoid this is simply to draft a partnership agreement from the very beginning.
A contractual agreement
Many business partners, especially when they are starting a new company, may feel tempted to begin working together with only a verbal agreement or a handshake deal. They do not have a formal contractual agreement in place.
But by taking the time to write a physical partnership agreement, they can address many of these potential issues in advance. For instance, the partnership agreement can stipulate that both partners own 50% of the business so that there are no future disputes over ownership percentages. It can outline what should be done with revenue and earnings from the company so that there are no financial complications regarding how money can be used or distributed in the future.
In many ways, drafting this agreement in advance is much easier than going through litigation when a dispute arises. The partners are still on good terms, so they can consider potential complications and work to avoid them before the situation becomes tense or contentious.
Setting up a partnership
If you are a business owner looking to start a partnership, it is important to know what steps to take to set it up properly and how to address any disputes that may arise in the future. Be sure you are fully aware of your legal options.