Going into business with a partner has a lot of benefits, like bringing a broader mix of skills and more significant financial resources to a business. Unfortunately, they also have more potential for situations that cause disagreements or conflicts severe enough that someone files a partnership lawsuit. If you’re considering going into business with a partner, here are a few tips to help ensure you have a plan for how you will proceed if you and your partner ever disagree on an aspect of the business.
- Make sure your values and goals align. Differing values of views on the long-term vision for the company is one of the most common reasons for a business partnership lawsuit. Before entering a partnership with someone, discuss your visions for the company, including the growth strategy, leadership style, and workplace environment you hope to employ. It’s helpful to put these things into writing, so you can refer back to them as necessary.
- Discuss how you’ll handle a worst-case scenario. While no one wants to think about their business struggling or failing, it’s important to agree with your partner about your plan if it does. It’s difficult to make rational or impartial decisions in the thick of a conflict or hardship, so to avoid a partnership lawsuit, you should talk with your partner about your plan for if and when serious obstacles arise.
- Have these discussions early. Discovering that you have a serious disagreement with your business partner after you have already invested a significant amount of time or money into your business can make you feel like you’re in too deep to back out. Be proactive and arrange a time to thoroughly discuss the above matters before formalizing a partnership.
- Create a formal agreement. Talking with your business partner is all well and good, but putting things into writing is the best way to make sure you actually use the methods you discussed to resolve problems. Your legal agreement should clearly define each partner’s duties, ownership, pay, and financial role and provide an exit strategy for each partner. Each partner should consult an attorney who can help ensure the document is reasonable and lawful and be an aid if a dispute arises despite the agreement.
No one wants to think about the possibility of a serious dispute with their business partner, but most partnerships will experience hardships or disagreements at some point. The best way to prevent a conflict from turning into a partnership lawsuit is to have a plan for handling disagreements when they arise.