- A partnership agreement avoids disputes by clearly defining the expectations regarding all the business operations and the role of each partner.
- Having compatible partners is very useful in avoiding future disputes in the partnership.
- There is a high risk of disagreements in a partnership type of business set-up due to different ideas.
One of the easiest ways when it comes to structuring a business and getting additional funds and a mix of skills is through partnership. Starting a company as partners is advantageous in several ways since people working together towards a shared goal are more productive than a single person.
Though having all these advantages, a partnership is also at risk of disagreements no matter how big or small the business may be. There are a lot of reasons why disagreements emerge; hence, the best solution for partnership disagreements is avoiding them rather than solving them. Below are some of the ways of preventing partnership disputes.
Have a written Agreement
One way of avoiding partnership disputes is by coming up with a written partnership agreement. To avoid loopholes, you can hire a business lawyer to help you with the partnership agreement. A business lawyer in Sydney like Streeter Law Firm knows a lot about the legal contracts and will come up with an agreement tailor-made for your partnership. A partnership agreement avoids disputes by clearly defining the expectations regarding all the business operations and the role of each partner. A partnership agreement can also provide dispute resolution procedures for an easier resolution in the future.
Compare the Partner’s Values and Goals
The primary source of dispute in partnership is varying value systems and vision for the business. To avoid future conflicts in this context, the interested parties should compare their values and issues and collaborate in writing down the agreed values for the business.
Critical issues such as the growth strategy of the business and the leadership strategy to be employed should be decided among all members for them to start together in unison. Having compatible partners is very useful in avoiding future disputes in the partnership.
Clearly Define Partner’s Roles and Areas of Authority
In business, partners have different skills and cannot perform the same task in the company. It is, therefore, essential to decide early enough what role each partner will play in the business. It is also necessary to clearly define each partner’s authority in a given role.
The details about each partner’s role should be clearly recorded in the partnership agreement to act as a point of reference in the future. Sometimes decision-making power can be determined by the resources that each partner has invested in the business.
Making Everything Clear
Having a partnership agreement free of ambiguity is essential in preventing future disputes. Unclear and ambiguous statements can be a source of dispute among partners to the extent of going to litigation.
Every partner should have an idea of what should happen in the worst-case scenario before getting into a partnership agreement. Partners should also get an opportunity to express their concerns about the agreement before it becomes enforceable to avoid a future expression of discontentment.
Solve Small Issues Early
You can try your best to avoid disputes from occurring, but issues are likely to appear at some point in the life of the partnership. The best way to prevent the small problems from escalating into huge disagreements that can also be solved through the court is by finding the solution to the issues early enough.
All partners should be ready to discuss possible ways to fix any issues arising in the partnership. Some of the disputes that occur when a business is running may not be captured in the partnership agreement. Such emerging issues create a need to regularly update the agreement to fit the current state of your business.
There is a high risk of disagreements in a partnership type of business set-up due to different ideas. The best way to solve this issue is to find preventive measures rather than waiting for the worst scenario of litigation. Everyone is interested in good business ideas, but it is advisable to hire the services of a lawyer to help in drafting a written agreement.
Such agreements should capture all possible sources of disputes that will be a point of reference when disagreements arise. Partners should also share each person’s vision before getting into a partnership to avoid future conflict in ideas that may risk the growth of a business.