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First Steps to Avoid Partner Disputes

First Steps to Avoid Partner Disputes

When business partners have misaligned goals, visions for future growth, or management philosophies, partner disputes are likely to arise. A business may suffer harsh consequences as a result of a partner dispute, such as clashing staff, operational weaknesses, failed projects or ventures, and even messy separation in serious instances. It is best to prevent a conflict from arising in the first place. During the formative stages of a partnership, measures should be taken to prevent conflicts later on.

Preventing Partner Disputes

1. Select Complementary Partners

Choosing partners with very similar skills can lead to overlap in jurisdictions and therefore tensions. Instead, partners should have complementary skills so that weaknesses will be minimized. Additionally, partners must avoid competition in the workplace, and resist the urge to outdo the other. Instead, partners must aim to work together to give value to investors, customers, the team and accomplish the business’s goals. A values agreement can be jointly written by the founders. This signed document outlines the desired business culture and leadership atmosphere, as well as each founder’s personal management and growth philosophies and their ethical commitments to each other. With this agreement, partners can identify whether their individual philosophies and contributions to the business can coexist.

If these preventative measures are taken, a partner dispute is less likely to occur. However, if a dispute does occur and does not get resolved after multiple discussions and mediation, it may be best for the partners to go their separate ways.

2. Draft an Agreement

Before starting their business operations, copartners should draft and sign a written agreement, either a partnership or operating agreement — depending on the type of business they will be running. This agreement should explain in detail the roles, duties, and obligations of each partner. The agreement should also define the distribution of control, assets, and compensation, as well as the capital contribution and decision-making processes. The agreement should also address worst-case scenarios, such as disputes, the removal or withdrawal of a co-founder or partner, or the termination of the partnership if necessary. This signed document provides clarity and enforceable guidelines that partners can follow should an unexpected development occur.

3. Hire an Attorney

A seasoned South Florida corporate and business law attorney can assist in drafting the most suitable agreement. It is tempting for owners to rely solely on agreement templates found online when drafting an operating or partnership agreement, but this is not advisable. Each business and its needs, interests, and goals are different, and a standard template cannot be modified enough to adequately accommodate those unique characteristics. An attorney will know how to draft an agreement that is best for a specific business and its co-owners.

Hiring an experienced South Florida corporate and business law attorney is the best way to ensure an amicable separation. Whether you are forming a partnership or dissolving one, our legal professionals can assist you in knowing your obligations and rights. Call the law offices of Kelley & Fulton today for a free consultation.