4 tips for preventing business partnership disputes

Business partners may avoid future disputes by comparing values and goals, planning for difficult situations and drafting a partnership agreement early on.

Forming a business partnership can offer many benefits, as partners can typically bring a broader mix of skills and greater financial resources to a business. However, partnerships can also create a higher risk of disagreements and eventual legal disputes. As a result, it's essential for business partners in New York City to be familiar with the measures that can help head off these disputes.

1. Compare values and goals

Many business partnership disputes arise because partners have different value systems or hold distinct long-term visions for the business. Forbes recommends that partners compare their views on these issues and then work together to put a values statement into writing. Current or prospective partners should consider several matters, including:

  • The type of growth strategy that the business will employ
  • The leadership style that the partners will utilize
  • The kind of work environment that the partners want to produce

By understanding one another's views on these issues, partners can confirm that their goals for the business and approaches to running it are fairly compatible.

2. Consider the worst case

To head off future commercial disputes and litigation, business partners should also consider various worst-case scenarios, such as sizable financial losses. It's crucial for partners to agree on a plan to address these issues early on. Once these roadblocks actually arise, it may be much harder for partners to make impartial decisions, which may increase the risk of conflict.

3. Discuss issues early

Partners should discuss all of the above matters early on, before they have become too invested in the business and the partnership. People who discover serious disagreements with a partner after they have already dedicated significant time, funding and resources to a business may feel they are too committed to the venture to back out. Reviewing these issues early or even before a partnership is formalized can help a person determine whether the partnership may be ill-advised.

4. Draft a formal agreement

Business partners should also draft a formal partnership agreement, rather than trusting that their personal relationship will enable them to resolve any future disputes. According to The Wall Street Journal, this legal agreement should clearly define each partner's duties, ownership, pay and financial role in the business. The agreement should also provide an exit strategy for each partner.

When creating this legal agreement, partners may each benefit from consulting with an attorney. An attorney may be able to help a person assess whether an agreement addresses most contingencies in a reasonable and lawful manner. Should disputes arise in spite of an existing agreement, an attorney may also be able to help a person seek an expeditious resolution through litigation or other means.