Valenti Hanley PLLC

Avoid these 3 common partnership dispute causes

Setting up a business is tough. You have a lot to think about, and most people realize that it's hard to do it alone. That's why partnerships are so common in business. Co-founders, for example, may work together and have better access to capital for the creation of a business. It works out well when the partnership is good, but if it sours, there can be many problems.

There are a few common partnership dispute causes that you can avoid if you plan for them in advance. Most disputes are caused by misunderstandings and disagreements over basic principles that affect the business. Discussing those thoroughly can help prevent many of the disputes that are seen in business today.

Here are three causes of partnership disputes that you should try to avoid.

1. Disagreements over management

Sometimes, disagreements happen due to differences of opinion about culture, branding or growth strategies. If partners are working together for the first time or are just starting their business relationship, it's important for them to talk about their goals and philosophies to find common ground.

2. Misunderstandings due to a lack of operating agreements

It is essential to work together only once you have a signed operating agreement. This agreement should have important information such as your role, compensation and the protections offered to your position. This agreement is essential, because it gives you leverage.

3. Trouble from a lack of value agreements

Value agreements are documents that co-founders draw up to show their ethical agreements and commitments. For example, a value agreement might indicate the kind of culture and leadership atmosphere that is expected in the workplace and between the founders themselves. This agreement forces co-founders to sit down and talk through things such as how to grow the company and the kind of chain of command that they'd prefer. This gives them a chance to address differences in opinion and ensure that the parties involved in the partnership are on the same page.

If you and your partner do end up in a dispute, you know that it could significantly impact your business. You should both sit down and talk about what you believe would help resolve the dispute. You can negotiate or try a mediation session to resolve your dispute. If you can't resolve it, then you may want to look into breaking off your partnership.

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