If there is more than one owner of a business, there is a pretty good chance that disputes will arise throughout the business relationship. Although some disputes may be major, the partners can resolve many of the issues fairly easily if both partners are willing to work on a solution.
There are various methods used to settle disputes. However, the best strategy is to plan ahead and prevent issues from occurring from the start.
Dispute resolution methods
According to Harvard Law School Program on Negotiation, there are three main types of resolution methods available to business partners. For many issues, mediation and arbitration are usually adequate, and they are much less expensive than litigation.
Mediation is the most collaborative option, and it involves a neutral mediator that works with both sides to come up with an agreement. Arbitration also involves a neutral arbitrator, but the process is more like an informal court case, where each side presents their argument and evidence, and then the arbitrator makes a binding decision.
Litigation is the most formal process, and it is the most familiar method. It involves both sides presenting their cases to a judge or a judge and jury, who make the final decision.
Prevention strategies
There are numerous strategies that partners can take to prevent disputes. The Chron discusses that one of the crucial things to do before starting a company with someone else is to write and sign a partnership agreement. Having things in writing ensures that the partners are on the same page and that they discuss and make decisions regarding daily operations, profit sharing, liability, debt and other considerations.
An agreement addresses what happens if one of the partners dies or wants to get out of the business. Partners may also want to include the method they would use in the event a dispute occurs.
Along with having a strong foundation at the start of the company, one of the benefits of having a partnership agreement is that it overrides the state laws, such as the Uniform Partnership Act.