A dispute with your business partner is complicated enough on its own. It’s even more complicated if you don’t have a partnership agreement.
Even so, this is fairly common. A lot of times, a business starts as a small idea between friends or even family members. They start it in their spare time and never bother to get the paperwork in place. By the time the business is so big that they realize they need a more structured approach, it’s hard to know how to get that structure in place — or they may feel uncomfortable doing so.
But that agreement can help with disputes in multiple ways. For instance:
- The agreement can define what authority each of you has within the company. If you disagree on something, the paperwork may not help you get on the same page, but it may tell you who has the legal power to make that decision. This can head off a lot of disagreements before they even begin.
- The agreement can lay out how you should resolve disputes. Do you need to work with a mediator or a legal team? When do you get to that point? Who gets to pick the mediator? What steps are you going to take? Knowing all of this in advance, again, though it doesn’t solve the problem itself, points you toward the solution.
- The agreement can tell you how to take specific actions. For example, maybe your argument is over adding a new partner to the business. With the right partnership agreement in place, this process is already pre-defined. You can then use this as a guideline to get through the disagreement or it can prevent it from happening.
As you can see, when looking at these complex business matters, the key is to plan in advance as much as possible. Find out what legal rights you have, what options you have, and what steps you need to take. Running a business can get contentious at times and may lead to litigation. You need to know where you stand.