6 Strategies to Avoid Business Partnership Agreements
Most people enter into partnership when starting a business as a way of combining resources and skills. Working together can be fun, but there is always a risk of conflicts because partners can sometimes have differing opinions and ideas.
Most people enter into partnership when starting a business as a way of combining resources and skills. Working together can be fun, but there is always a risk of conflicts because partners can sometimes have differing opinions and ideas. Knowing that there is the possibility of dispute, a partnership must find ways of avoiding these disputes as they can affect the normal functioning of a business, especially if they are not solved. Below are some of the things you can do to avoid disputes in your partnership business.
1. Start with a Written Partnership Agreement
A partnership agreement is not a must for your business to run, but it is wise to anticipate possible causes of disputes and find ways of avoiding them. Consulting with a commercial dispute lawyer to help you draft a partnership agreement by determining any potential loophole and coming up with a way to prevent possible contractual disputes. Written agreements mainly dictate the roles of each partner, their compensation, how to terminate the partnership and many more. The key feature is to ensure that the agreement is clear as it will be the primary source of guidance in case of disagreements.
2. Compare Your Partner’s Values and Goals
The main source of disputes in a partnership are differences in the goals of the partners. Partners must share their goals and vision for the partnership and come into agreement on the values of the business. People who don’t have compatible goals should not be in a partnership due to the high possibility of disputes that may lead to the closure of the business.
3. Consider the Worst-Case Scenario
Some people avoid talking about the worst-case scenario’s when coming up with a partnership but a collaborate approach will identify possible challenges, and the best solution is a preventive measure. Having a plan on how to address these issues will give guidance if any roadblock arises in the future.
4. Clearly Define Each Partner’s Roles and Authority
One major source of disputes is an authority. All the partners cannot have the same decision-making power, especially if the contribution of resources was not equal. Partners also have varying skills and capabilities, meaning that one must have a clearly defined role in the running of the business. The functions agreed upon by the partners should be clearly recorded to avoid future partnership disputes.
5. Find Early Solutions for Small Issues
As much as you try to avoid disputes in tour partnership, some differences may appear at some future point. You can quickly solve small problems before they escalate into huge disagreements that can only be settled through litigation. Solving arising issues together as a partner shows your concern to the complaining partner and will help them bring their issues forward. Having an agreement does not mean that issues will not arise, but they create a need to update the agreement regularly.
6. Make Everything Clear
Having a clearly written agreement is crucial in avoiding future disagreement in a partnership. A document with ambiguous statements can lead to increased disputes rather than providing a solution. A good agreement gives clear instructions on what should be done when a problem arises in the business. The agreement should also be accepted by all the parties to avoid any future expression of discontentment by partners who felt side-lined when drafting the agreement.
Disagreements are a common risk in a partnership business set up due to varying ideologies. Solving disputes can be challenging and can lead to the closure of a partnership if the partners don’t come into agreement. The best way to keep a partnership safe is by taking preventive measures rather than waiting for the worst to happen. One method of preventing disagreements is drafting a partnership agreement that acts as the point of reference in case of disputes. All partners should be involved to avoid discontent by some members.