Many business disputes happen because partners don’t agree on what decisions should be made for the business. One partner believes the business should expand and focus on production, while the other believes they should prioritize quality and limit expansion, even if that means limiting revenue. The two individuals simply have fundamentally different ideas about what they want the business to become, making it difficult to decide how to move forward.
One thing these partners may wonder is whether they are legally required to cooperate, or if one person can make decisions unilaterally.
The partnership agreement
The first thing to consider is whether there is a partnership agreement or other documents defining the ownership structure and decision-making process. In many cases, this agreement will specify how decisions must be made and outline steps to resolve disputes. For instance:
- Some companies use a democratic process where all business partners and investors have a vote.
- Others rely on a board of directors to make key decisions.
- In some cases, there is one primary decision-maker who may consult others but has the final authority.
Regardless of the specific structure, this documentation provides guidance and should be followed.
Ownership percentages
Another important factor is the ownership percentages held by those involved. In many cases, a majority owner—someone who owns at least 51% of the business—can make decisions even if minority owners disagree. However, this doesn’t apply to a 50-50 split of ownership, which would require the partners to work together to reach a consensus. This is why defining ownership percentages in advance is so critical.
Resolving disputes
Disputes and decision-making challenges can be complex in any industry. Those involved need to understand their legal options.
