business partner asking for legal advice with dispute

3 Effective Strategies to Resolve a Partnership Dispute

Partnerships offer a number of advantages over other business arrangements, including the combined efforts and skillsets of two or more partners. But like any other business, there is a chance that the partners will disagree with or misunderstand each other. This could quickly explode into a full-fledged dispute that may threaten to destroy the partnership. Fortunately, there are some tried and true methods for effectively resolving the dispute so the partners can continue to reap the benefits of their enterprise. The Business & Corporate Law attorneys of SederLaw are here to guide you with strategies that include:

Develop a Detailed and Customized Partnership Agreement (or Modify an Existing One)

If you haven’t already formalized your business relationship with your partners, it’s time to do so by way of a partnership agreement. Or you may need to update the agreement to account for changed circumstances. The primary objective of a partnership agreement is for all partners to understand their rights, obligations, and legal protections with respect to the business.

Every partnership agreement is different so it’s not recommended that you use a prewritten template. Rather, a knowledgeable attorney can guide you on negotiating and executing an agreement that fits your business. The agreement will likely contain such terms as:

  • The responsibilities and duties of each partner
  • Each partner’s capital contribution requirements
  • How each partner will be compensated, along with other interests each partner will have in the business
  • The decision-making processes and dispute resolution methods to be used
  • How each partner can exit the partnership

Even if a dispute has already arisen, you can adopt a partnership agreement or modify an existing one to account for it. Our attorneys can assist.

Devote Time to Discussing Your Issues with the Other Partners

This may seem too obvious, but many partnerships fall apart simply because the partners don’t communicate with one another. Misconceptions, suspicions, and tensions can fester in the absence of open and honest dialogue. If you are having a problem with another partner, especially one that has just recently manifested itself, it is imperative that you attempt to talk about it.

The goal is to realign your interests with those of the other partners and clear the air about any misunderstandings that may exist. To that end, consider these tips:

  • Be respectful in your communications
  • Focus on the facts and set aside your emotions
  • Find common ground and build from there
  • Listen to the concerns and viewpoints of the other partners without interrupting
  • Identify (and follow) a plan for resolving the issue

Depending on the nature of the dispute, you may need the input of a neutral third party. This is where the final strategy comes in.

Use a Mediator If Necessary

An experienced business mediator can help you manage any partnership dispute that may arise. A mediator can assist with:

  • Drafting, negotiating, executing, and modifying a partnership agreement
  • Facilitating positive discussion and resolution of any conflicts or issues
  • Settling the dispute, especially if litigation has been threatened or initiated

By nature, the mediator will be neutral. The mediator’s job is not to side with anyone or decide anything on behalf of any partner. Instead, the goal is to help the partners talk about their dispute and, where possible, reach an agreement for how to best handle it. That agreement may be a partnership agreement or settlement of a lawsuit. It may even be the amicable exit of a partner from the business.

If you are using mediation to enter into a partnership agreement, settle a lawsuit, or negotiate your departure from the partnership, it is imperative that you retain skilled legal counsel. Failure to do so could jeopardize your rights and interests.