Valenti Hanley PLLC

4 most common business disputes: what can you do to avoid them?

Conflicts are part of doing business. People do not always agree on what is best for a company. If you own a business, you should consider the following common business disputes and how you can prevent them from happening to you:

1. Partner disputes- Partner disputes are the most common type of dispute. These disputes generally occur when partners disagree about the future of their business. Other common issues between partners involve distributing profits, hiring candidates, selecting leadership, allocating responsibilities, choosing investments and making other financial decisions for the company.

It is important for partners to have good communication. You can never know all the problems that will arise, but try to discuss and draft agreements for as many issues as you can think of before entering a partnership. If a conflict arises that you cannot resolve between yourselves, consider involving a mediator, arbitrator or those who can help with other forms of alternative dispute resolution.

2. Shareholder disputes- These disputes arise when shareholders disagree with the leadership of a corporation. These disagreements can result from major changes in a business or decisions regarding operations and finances. If a corporation denies shareholders involvement in major decisions or they receive a lesser payout of shares for any reason, a dispute is likely to arise.

To prevent shareholder disputes, companies should put a Shareholder Agreement and Deed of Adherence in place. Shareholder Agreements provide for the rights of shareholders surrounding important issues that might arise. If a Shareholder Agreement is in place when a new shareholder joins a corporation, a Deed of Adherence binds the new shareholder to the previous agreement.

3. Contract breaches- A contract is a legally binding agreement between two parties. A contract breach occurs when one party does not perform a duty or obligation specified in the agreement. Contract breaches commonly occur when one party fails to meet deadlines, make payments, deliver goods or perform services.

Contract breaches generally occur when terms in the agreement are vague or unclear. To prevent a breach of contract, make sure the contract is in writing and all parties agree to their specific duties and obligations.

4. Employment disputes- Employment disputes generally arise over issues of discrimination, compensation, extended leaves or wrongful termination.

Promoting a good business culture is the first way to prevent an employment dispute. If employees are happy at work, they are less likely to bring a lawsuit against their company. To prevent a lawsuit, some companies look into Prehire Arbitration Agreements. These are agreements employees sign before starting at a company that require any future disputes with their employer to be settled outside of court.

As a business owner, you need to protect yourself from these types of disputes. Consider consulting with a trusted business attorney in your area to help you prevent future conflicts and handle them if they do occur.

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