How can you avoid disagreement in partnership? | Partnership Agreements
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disagreement in a partnership

How can you avoid disagreement in a partnership?

Partnerships can be very complicated setups that can turn nasty pretty quickly if the correct measures and buffers are not put into place. Here are a few ways to limit the chances of partnership disagreements.

The Written Agreement

It is important to have an agreement in writing. Usually the type of business agreements that can be created are Operating Agreements or Partnership Agreements.

The agreement should highlight the following aspects:

  • Who control the company and what is their percentage?
  • Highlight partner roles.
  • Point out the Capital contributions and their type.
  • Explain the handing of additional capital contributions.
  • Clearly state the Compensations and Distributions.
  • Show the procedures the business adopts when decision making.
  • Make contingencies for worst-case scenarios such as conflict resolution, removal of partners, how shares percentages will fluctuate should an existing or new partner invest additional money into the business and so on.
  • Outline circumstances that would warrant partnership termination.

Hire a Lawyer to formulate your Operating or Partnership Agreement.

In many instances partners will forego having an agreement or try and prepare one themselves (either from scratch or from a template they find online). Usually they do this to save time and money and overlook the importance of making a concise, professionally created agreement.

To this end there are a number of good reasons to hire a Lawyer for this process, some being:

  • All businesses differ with each partner having their own set of goals and business direction. Trying to modify a generic Agreement downloaded from the internet rarely includes all the elements each partner is looking for. A Lawyer can customize your agreement so that all partnership requirements are met.
  • Hiring a Lawyer is a good investment. The money you spend on a Lawyer to create your agreement is relatively inexpensive when compared to money you could spend if an irreconcilable dispute arose or ambiguity in a flawed agreement leads to litigation. Spend a little money and time today, get it right, and avoid possible headaches in the future.

If a Dispute arises talk and focus on a solution.

As disputes arise try to address them in earnest so they do not escalate. Make a time to discuss the issue free from the hustle and bustle daily office protocol that may distract you. Something like an after work meeting, Saturday brunch or early dinner should suffice.

When you have the meetup remember you aim to find a solution – not throw blame or show. It is not an ego trip or a contest to prove the other wrong. You have a problem – now HOW do you fix it. Basically, put all differences and bickering aside and doing what is collectively best for the company to overcome the dilemma. This is how long-term partnerships survive. You will not always see eye to eye but with compromise and forward vision you can avoid serious arguments and come up with solid solutions.

Read More: Why Islamic Finance Disputes are Best Resolved via International Arbitration

If the disagreement persists, consider hiring a Mediator

If you and your partner cannot see eye to eye with the dispute getting worse consider hiring a mediator to help you resolve it. This is a smart proactive move that aims to keep things civil and remove any bias the partners may have by putting a neutral person into the process.

A mediator has many advantages, namely:

  • Disputes tend to ignite tempers and emotions between the conflicting partners making the process futile if they cannot overcome them. Mediators eliminate this emotion by remaining focused as finding a solution is his top priority.
  • Acting as a sound board for all partners involved, mediators facilitate non-confrontational dialogue.
  • To a seasoned mediator dispute resolution is nothing new. Because of this they offer bring new angles to solve current issues drawn from his / her past experiences with former clients. However, on the same note, the mediator also can see when a mutual resolution between partners is not possible.

When all fails Consult an Attorney

If all else has failed and the dispute is growing from bad to worse the last action to avoid any further damage is to hire a lawyer to make sure the split happen with minimal incident. It is in times of heated arguing where partners may try and remove their counterparts without the using the correct protocol which can lead to devastating lawsuits.

By engaging in a lawyer who proposes legal options you can severe ties and avoid further Partnership disputes. Such measures could involve buying out the other partner or if a partner is undermining the company by stealing clients and tarnishing the company reputation having an injunction put into place.

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