Even the most solid partnerships never run without disagreements. However, how you resolve a business partnership conflict makes all the difference in the survival and success of your business. Common reasons for partnership disagreements include embezzlement of funds, breach of contract, misappropriation of funds, minority owner rights, misuse of trade secrets, and breach of fiduciary duty. These disputes can result in bad blood, financial losses, and poor company image, which impact its overall chances of survival.
When these disputes arise, it is important to seek legal ways of settling them to ensure business continuity. Remember, it is always wise to involve a business partnership dispute lawyer to guide you through the right conflict resolution channels so you can protect your rights and protect your investment. If your business partnership is experiencing wrangles, below are legal strategies you can employ to resolve them.
1. Go Back to the Partnership Agreement
A well-written partnership agreement comes in handy during conflict resolution. It details every partner’s rights, responsibilities, decision-making procedures of each partner, and conflict resolution clauses. The clauses usually provide guidance on how to solve disputes, such as which partner has the upper hand in decision-making, appropriate channels for conflict resolution, and steps to take before the conflict ends up in court.
For example, if a dispute arises from profit sharing, the partnership agreement will have clear steps on how to go about it. This provides predictability on how to handle conflicts as every partner knows what to expect in case of disputes.
2. Negotiation
One of the best ways to resolve a business partnership dispute is through communication and direct negotiation. Sometimes, it is all you need to clear up any misunderstanding and get your business relationship back on track. During the negotiation, ensure you communicate respectfully and truthfully while also actively listening to the other side.
While every partner is sure to put their needs and goals first, the goal of a negotiation is to arrive at a compromise that serves both parties. Once you come to an agreement, it is best to put it in writing to serve as evidence for future reference.
3. Mediation
Mediation should be your next conflict resolution strategy if negotiation doesn’t work. It involves getting a neutral third party (mediator) to help you reach an agreement with your business partner without having to go to court. Mediators work by facilitating communication between the involved parties and helping you go past communication or decision-making challenges that hinder your conflict resolution.
Both business partners present their cases while the mediator listens without necessarily offering their own views or engaging in decision-making. Mediation is especially beneficial for business partners who wish to settle their differences and continue working together. Note that the aftermath of mediation is non-binding, and you have the option to withdraw from it at any time.
4. Arbitration
Unlike mediation, arbitration is a more formal conflict resolution strategy for settling business partnership disputes out of court. During the arbitration, the aggrieved parties first agree to go through the arbitration process voluntarily or as part of the partnership agreement. You then select a neutral arbitrator to listen to your case. It can be one person or a panel. The arbitrator should be an expert in the matter of contention.
Both parties then present their arguments and evidence. The arbitrator will listen to both sides before making a final decision, known as the arbitration award. The arbitration award is binding, and you can enforce it in court if the other party fails to adhere to it.
5. Litigation
Sometimes, litigation is necessary when everything else fails to settle the dispute. By filing a lawsuit, you give the court the power to have the final say in the subject of dispute. It is usually the last option for business partners who may still want the business to thrive.
When the dispute stems from a violation of responsibility, the litigation outcome may include financial damages to the aggrieved party. In other cases, the matter can go to court if criminal activity or misconduct is involved. Before taking your business partnership dispute to court, consult a business partnership dispute lawyer to analyze your case and the potential outcome.
6. Dissolution
For conflicts that are so serious that they threaten business survival and feasibility, dissolution can be the only way out. Dissolution means the partnership ceases to exist, and either party that wishes to restart the business must register it afresh. You can dissolve the partnership voluntarily by filing the required paperwork and completing other activities like paying creditors, selling assets, and distributing the partnership proceeds.
Alternatively, you can go the judicial way, especially if you do not agree on the dissolution. By taking the matter to court, you forfeit any involvement in the dissolution process and have to abide by what the court decides.
Conclusion
Business partner disputes can disrupt normal business operations and cause immense stress to the parties involved. However, with the right legal strategies, you can settle the conflict in a way that is satisfactory to both partners and keep the business running. What’s more, you can always seek the help of a business partnership dispute lawyer to ensure a smooth and successful conflict resolution process.
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