• What to Do When Business Partners Do Not Agree
  • June 29, 2016 | Author: James H. Gulseth
  • Law Firm: JGPC Business & Corporate Law - Pleasanton Office
  • Partnerships are one type of business entity available to California entrepreneurs. A partnership can be formed at any time when two or more individuals agree to pursue a business venture for the purposes of making a profit. In most partnerships, each of the founding members (or partners) of the business have the right to participate in making decisions that affect the operation of the partnership (unless the partnership agreement specifies otherwise). When two or more partners disagree as to how the business should be run, however, a partnership dispute can arise and stall further operation of the business.

    Tips for Navigating a Partnership Dispute

    Partnership disputes range in severity from mild to severe. While some disputes may not impact a partnership’s operations at all, other disputes can effectively shut down the business’s operations until the dispute is resolved. Even where a dispute does not result in the cessation of business activities, prolonged partnership disputes can drain morale and cause suspicion or animosity to develop between the partners. Thus, it is important that partnership disputes be resolved quickly. When two or more partners are not seeing eye-to-eye, the following tips may help:

    1. Practice “active” listening: Make certain you understand the nature of the disagreement between yourself and/or the other partners. What are each of your concerns, and what solutions are each of you offering? It is not uncommon for disputes to erupt unnecessarily (or resolution be prolonged unnecessarily) simply because of a misunderstanding.
    2. Revert to the partnership agreement: If your partnership has a partnership agreement that discusses disputes (if not, your partnership should develop such an agreement), revert back to that agreement and follow the directions thereof. When there appears to be an impasse, your agreement may provide that one partner’s vote is the deciding vote. Or your agreement may provide that no decision can be made if the partners are not unanimous. Whatever procedure your agreement provides is the procedure that should be followed – failing to do so can result in one or more partners filing a lawsuit against the partners who disregarded the agreement.
    3. Consider hiring a mediator: A mediator is a neutral third-party whose role is to facilitate communication between the parties of a partnership dispute and help them arrive at a mutually-agreeable resolution. If you and the other partners in the dispute are at an impasse, you may find helpful. A mediator may propose an agreement, but such agreement would not be binding unless all partners agreed to it.

    This article was originally published on JGPC.com.