Starting a business with a partner is exciting. You’ve both come together to take a great business idea and run with it. Filled with optimism, you both want to move forward with your business as soon as possible.
However, just because you and your partner seem like you are on the same page about the big picture, doesn’t mean that you will both agree on all the details. This fact is why there is potential for conflict in every business and business relationship.
If you don’t face these potential conflicts early, they can spiral as your business grows and evolves.
To help you plan for such times, this article discusses 3 smart ways to preemptively deal with business partner disputes.
Set rules early with the help of an attorney
Before you and your new partner jump into the daily running of your business, you both should have negotiated and signed an operating agreement.
Such agreements are important for every business, but they are essential to any business where the partners are sacrificing capital, committing to a substantial move, or quitting a “day job.”
Operating agreements need quite a bit of information, but in general, they should at least spell out the following:
>each partner’s role in as much detail as needed
>how each partner will be compensated
>the protections available for each partner
>what happens in the case of the business dissolving
Although you and your partner can start to plan for the final operating agreement by using a template, we highly recommend the final agreement be completed with the assistance of an attorney. An attorney can often see potential snaps or forgotten details, and can work with you and your partner to correct any issues before they make an impact on your business and/or partnership.
Either way, the rules of your business should be set early, so as to prevent as many future conflicts as possible.
Account for the possibility of the worst-case scenario
At the beginning of a new venture, partners don’t usually want to think about what will happen if the worst-case scenario occurs: unsolvable conflict that requires you and your partner to part ways.
To account for such an occurrence in your operating agreement, ask yourself some of the following questions.
>How will the business be divided if my partner and I want to part ways?
>Will a partner be bought out?
>Will a partner be replaced? By whom? And who will be responsible for finding the replacement?
>Will management staff play any role in the transition?
>How will business investments work?
While it isn’t pleasant to discuss worst-case scenarios, it is better to deal with them when they are still scenarios and not a reality.
Be ready to accept whatever reality comes out of negotiations
Business negotiations can be hard, especially when each party comes in with ideas on how they think they will turn out.
While there may be a few things about the business that you or your partner feel strongly about, the point of a partnership is that everyone wants to do what’s best for the business and move it forward.
Therefore, each partner should evaluate what specific responsibilities they want to own and what they can agree on. Some conditions you may feel indifferent about, some you may feel would be nice to have, and some you may feel are must-have deal breakers.
However, it’s important to remember that not every idea or condition will be met for both partners. You may find out that your business idea doesn’t work, but it’s better to find that fact out in negotiations than after you’ve invested a great deal of time and money.
Accounting for and solving problems early is the most cost-effective way to deal with them in business. Of course, there is still the possibility that amiable partners will find themselves butting heads even with preemptive measures. However, if or when that happens, you will be better prepared to deal with it as quickly as possible.
Do you need assistance with your business case?
Elkhalil Law is here to help you with your business case or in creating your own business. We offer in-person, over the phone, and Skype consultations. Contact us today so that we can discuss your case!
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Disclaimer: Nothing in relation to the enclosed information should be construed and or considered as legal advice for any individual, entity, case, or situation. The following information is prepared for advertisement use only. The information is intended ONLY to be general and should not be relied upon for any specific situation. For legal advice on your specific situation, we encourage you to consult an attorney experienced in the area of Immigration Law.