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How To Minimize Conflicts With A Business Partner

On Behalf of | Dec 3, 2022 | Business Law

Business partnerships can be extremely advantageous, but if they are not set up correctly, conflicts will more than likely arise. Having a thought-out and thorough partnership agreement is one way to cover important aspects of the relationship, which improves clarity and prevents many disagreements.

Even with a partnership contract, sometimes partners are unable to resolve disputes. When this happens, there are various resolution methods.

The importance of a partnership agreement

According to, an agreement should address the contributions and duties of each partner as well as all potential situations that could occur. Along with the basics, such as the name of the company, purpose of the business and mission of the company, some of the things to include are:

  • Financial and labor contributions of each partner
  • Percentage of ownership
  • Profit and loss distribution
  • Management authority
  • Vacation and other benefits
  • Buy-sell agreement in the event one of the partners leaves

How to handle unresolved conflicts

One of the clauses that many partnership agreements include is dispute resolution. This outlines how the partners will settle unresolved disputes. According to the Harvard Law School Program on Negotiation, litigation is one option for resolution. However, litigation is lengthy and costly, so most partnerships choose alternate methods, such as mediation or arbitration.

In mediation, a neutral third party works with each partner and helps them come up with a fair solution together. Mediation is the least expensive method and helps foster a better relationship between the partners.

In arbitration, a neutral third party listens to the evidence presented by each side and then makes a decision. Most decisions made in arbitration are binding, which means both sides must accept the result.