When you decide to go into business with a colleague or friend, it’s normal to expect some minor disagreements. These can usually be resolved with some open discussion, but what happens when you and your business partner simply cannot come to an agreement?
Serious conflicts can damage not only the partnership, but the business too. Let’s take a look at what kind of disagreements can arise and how they can be resolved effectively and with minimum damage.
When can conflicts occur?
Some common causes of business partner conflicts are when a business partner:
- uses their company shares as collateral for a bank loan
- is ‘moonlighting’
- undervalues the other partner’s contributions
- is facing life-altering events
- passes away and is replaced by someone in their will
There’s no straightforward way to deal with complex cases like these but as a first step, business partners should always attempt to resolve the problem internally; it is never helpful to ignore a problem, regardless of how difficult the situation is.
At this point, both partners will have so much invested in the business venture that open and honest discussion will be the best step for conflict resolution.
However, if this option is no longer on the table, it’s time to start planning for the next steps and seeking external advice.
Know your rights
Before you speak to a lawyer, know what your legal position is and an idea of your preferred outcome. The different laws that govern different industries can be complex, so know your rights before taking the next step. Let’s take the media and entertainment sector as an example.
The industry requires business-owners to consider entertainment laws regarding intellectual property (copyright and trademarks), defamation, commercial contracts, license agreements and censorship. So whatever your industry, it’s important to know where you stand legally and what to prepare for the conversation you will have with your chosen lawyer.
The topics you can expect to discuss with your lawyer will include potential dispute resolution options (such as mediation), legal matters that may complicate the claim, what happens if the matter is taken to court, the stages that will take place both in and out of the courtroom and potential legal fees.
How to (attempt to) avoid disputes
If you are about to enter into a business partnership for the first time and want to future-proof both your business and the partnership, it’s a good idea to plan ahead. Before the partnership is formalised, draw up an agreement between both parties that details:
- Each partner’s monetary contribution
- The roles, responsibilities and duties of each partner
- Compensation for each partner
- Decision-making procedures
- A process for any business partner conflicts
- The process if you want the partnership to be dissolved
Although this may be a difficult conversation to have in the initial stages of a partnership, it’s the type of forward planning that both of you will appreciate if a conflict does arise.
The effective way to resolve a business conflict
To summarise, the first step in attempting to resolve a disagreement between business partners is
However, you could save yourself and your business partner the legal fees if you seek advice on how to prevent the dispute from proceeding to court.
