Avoiding Business Partnership Disputes – Part 1

Most partners start out their business as friends and believe that nothing can come between them. However, as time passes and management differences emerge and the business grows, issues can arise and cause disagreements between partners. It can be uncomfortable to disrupt the peace with your partner, so having a plan in place for how arguments will be handled is essential.

• Operating Agreement . While you may want to work together during a trial period without a written agreement , the quicker you put your agreements into a binding document, the better. Neither partner should make sacrifices until an Operating Agreement has been signed by all partners.
• Legal Counsel . Don’t try to save money by using a do-it-yourself or fill-in-the-blank Operating Agreement. If you intend for your business to be your career, it is worth the investment to hire an attorney to draft your company’s governing document. The small fee you pay to protect your best interests is worth it when it can save you thousands of dollars in future litigation.
• Predict Obstacles . One of the key functions of the Operating Agreement is to predict worst-case scenarios and to provide methods for how to handle them. Although many of the scenarios covered in the agreement may never occur, if one does, having an agreed-upon protocol to follow will significantly reduce the fighting between the partners.
• Don’t be Afraid to Walk Away . If you and your partner’s negotiations of the Operating Agreement begin to spiral out of control, you should consider whether you still want to start the business with this person. You don’t want to partner with somebody who is going to be difficult to work with or who has questionable ethics. If your gut instinct is telling you to walk away, listen to it.