Avoiding Legal Disputes Between Business Partners

Litico Law Group
Two businesswoman sitting in office shaking hands. Concept for Avoiding Business Disputes Between Partners

Business partnerships can come with many benefits and help owners accomplish much more than they would as a sole proprietor. But partners will rarely agree on everything all the time, and business disputes are not uncommon. Unfortunately, when difficult scenarios arise, the company’s future and its bottom line can be placed at risk. It’s important to understand that there are many measures partners can take in advance to plan for challenging situations — and help prevent conflict.

How Do Partnership/Business Disputes Occur?

Two or more partners in a business endeavor will rarely agree on everything. Accordingly, there can be many causes of partnership disputes. Some common reasons for conflict among partners can include breach of fiduciary duty matters, financial disputes, and lack of specific provisions in a partnership agreement. Conflicts can also arise when partners disagree regarding who is doing what work or if tasks are not distributed evenly.

In addition, business disputes among partners can happen if they have differing opinions concerning the expansion of the company or the services being offered. There can also be disputes if one or more partners wish to leave the partnership. Regardless of the reason, there are a few measures partners can implement to avoid the potential for conflicts and the possibility of legal action.

How Can Business Disputes Be Avoided?

Partners will rarely agree on everything all the time, and disputes are not uncommon. Before difficult scenarios arise, contact an Experienced Illinois Business Attorney at Litico Law to help you understand the many advance measures partners can take to help prevent conflicts.

Many business partnership disputes can be resolved before they occur by making sure all partners are on the same page. It’s essential that partners communicate effectively with each other and understand each other’s responsibilities and obligations. Here are a few steps business partners should take to avoid future disputes that can result in legal action:

Identify the Goals and Objectives of the Partners

Business disputes often arise because partners do not share the same values, or they have different long-term goals for the company. Partners should discuss their objectives for the company and consider their ideas on the type of growth strategy they will employ and the leadership style that will be implemented. By taking the time to understand each other’s perspectives from the outset, partners can be confident in knowing that their approaches to operating the business are consistent.

Have a Written Partnership Agreement in Place

Having a formal, written agreement in place is one of the most crucial steps partners can take to avoid disputes and the possibility of litigation. Although a written partnership agreement is not required by law, it can be critical to protect the company and safeguard the financial interests of the partners. A partnership agreement can do the following:

  • Resolve legal issues in advance
  • Address the capital contributions of each partner
  • Decide compensation and distributions
  • Specify decision-making procedures
  • Outline the methods to be used for conflict resolution
  • Determine what will happen if a partner fails to perform their duties
  • Address the circumstances under which the business can be terminated

While a partnership agreement is meant to help partners avoid conflict, it’s important to make sure it is as detailed as possible. Any ambiguity in terms or vague provisions could lead to disputes — and ultimately, litigation.

Clearly Define Each Partner’s Role and Authority

Partners should be clear regarding each other’s roles and authority when it comes to how the business will be run. Even if the partners share equal percentages of ownership, it’s vital to determine in advance who will handle the company’s day-to-day operations — and which partner will be responsible for the accounting and recordkeeping. The details of the partners’ roles should be put in the written partnership agreement.

Address Dispute Resolution Matters

Even when all partners get along, partnership disputes are inevitable. Partners should take the time to discuss all issues that could arise early on. They should also agree on a method of dispute resolution before conflicts occur. While litigation should only be used as a last resort, alternative dispute resolution methods such as mediation or arbitration can help to resolve disputes cost-effectively and efficiently. The partners’ preferred method of resolving conflicts should be specified in the written agreement.

Work With a Business Disputes Attorney

A business dispute attorney can not only assist business partners with handling disputes when they arise — they can also help them avoid conflicts. An attorney can work closely with the partners to prepare the necessary paperwork and agreements to help ensure the company thrives. They can also help the partners devise a strategy tailored to meet the company’s vision and specific needs.

Contact an Experienced Illinois Business Attorney

If you are forming a business partnership, it’s important to have an experienced business law attorney on your side who can help you avoid future legal disputes and complications. Located in Rolling Meadows, Litico Law Group provides skillful representation to business partners and entrepreneurs throughout Illinois for a broad scope of business matters. We welcome you to contact us by filling out our online form or call (847) 307-5942 to schedule a consultation to learn how we can assist you.

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