Valenti Hanley PLLC

What happens when business partners have a falling out?

Many times individuals will form business partnerships with friends, family members, or business associates. It can be smooth sailing for months, even years – and then all of a sudden, the partners have a disagreement about an important issue.

Now what?

If you find yourself in this position, there are some steps you can take to resolve the issue and get back to business as usual.

Review start-up documentation

It’s always a good idea to formally document a number of items when starting a partnership, such as each partner’s:

  • Job title
  • Job description
  • Compensation
  • Initial contribution

These are just a few ideas. The more things you and your partner can agree on – and document - prior to starting the business, the less issues you will have down the road.

What if you don’t have any initial documentation? This can make things a little more difficult, but not impossible.

Set up a meeting to discuss the problem

Rather than trying to make time during a busy work day to discuss a significant issue, take some time away from the stress of business. Schedule a long lunch at your favorite restaurant - or if it’s a complicated problem that requires more time, spend a weekend away, where you can golf and discuss the issue in a relaxed environment.

Focus on the solution, not the problem

You both know there is a problem, and what’s done is done. Rather than rehashing how the issue came about, put your heads together and focus on coming up with a solution. Remember, you both want what is best for the business.

Avoid the blame game

If one of you has made a bad decision that is affecting the business, it’s easy to play the blame game. Don’t do it – it will only cause more issues and hurt feelings. Again, focus on the solution.

Hire a mediator

It may seem like a drastic step, but a mediator could actually take a lot of the pressure off both you and your partner. There are many benefits to mediation, most notably that a mediator will help keep emotions – and confrontation – out of the negotiations. And most mediators have years of experience in negotiating conflict, while you and your partner probably do not.

If, despite your best efforts, nothing can be done to resolve the issue, you and your partner may both be better off ending the partnership and going your separate ways. If the business situation is complicated, you may need legal guidance to dissolve or split up the company.

Should you choose to start a partnership in the future, be sure to have some initial documentation set up prior to starting the business. An experienced business attorney can help make sure you have all your bases covered so that this type of disagreement doesn’t happen in the future.

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