How to Manage Disputes with Your Business Partners
Disputes between co-owners can happen, but they don’t have to wreck the corporation. Here’s how to bypass conflicts and handle them if they arise.
Carrying business partners is a lot like a marriage. You start the relationship with high expectancies, believing that you get ahead so well that nothing could go wrong. And then things happen: You have a problem making ends meet, and the financial tension causes conflict. Or you’re incredibly successful and have difficulty handling the growth. You discover you want different things, or someone isn’t a team player.
It’s idealistic to think that your relationship with your co-owners will voyage along without fighting. And yet, many small business owners are spontaneous when conflicts do happen. Here are several ways to help contain significant variances and tolerate them when they do arise.
Staying with the matrimony analogy, the more you’ve discussed your expectancies and dreams for the future early on, the more likely you are to be able to see eye to eye on the day-to-day decisions that support them.
One of the best ways to control significant disagreements from derailing your business is to think carefully about the people you choose as business partners in the first place. They should be individuals you trust and with whom you can work closely. You and your business partners should start with identical values and visions for the company’s future.
As you start your company, work to create a culture where you and your partners talk openly about ideas, issues, and concerns. Don’t let minor annoyances fester or passively let your partners do things you disagree with. As with any relationship, the more you bottle up your ideas or ignore your partners’ input, the more likely you will end up in a significant dispute. And your troubles will be much harder to resolve if you don’t have a history of compromising and talking things through.
An agreement between you and your business partners is another essential ingredient in conflict prevention. A contract gives you a framework for operating your business and making decisions.
The agreement may have different names depending on your business structure, operating agreement, partnership agreement, shareholders’ agreement, or bylaws. You may also have a buy-sell understanding to determine what will happen if someone wants to leave the company.
These agreements help you understand how to vote on important decisions, what each owner is expected to contribute to the company, let a new owner be, and split profits and debts. A small business lawyer can prepare agreements customized to the needs of your business.
Managing Conflict When It Happens
The conflict between you and your business partners can be a good thing if it causes you to focus on company issues that need to be addressed. But it can also be destructive—draining your energy and making it hard to move forward.
What’s in Writing?
A perfect place to begin resolving any potential conflict is to look at the written agreements between you and your co-owners to see if they offer guidance. For example, you and your fellow LLC members may disagree on splitting your first year’s profits. But your operating agreement probably explains what you should do. Always refer to your LLC‘s written documentation to see if the answer to your dispute already exists.
Hearing and Mediation
Other disagreements aren’t so easy to sort out. You and your partners may have different goals and visions, or you may become resentful and angry. If things have not deteriorated too far, try scheduling a meeting where everyone has a chance to talk—and everyone else must listen. By really listening to what your partners have to say, you may find common ground or be able to compromise.
Check with your lawyer or local bar association to find someone who has experience mediating minor business disputes. Some people find it helpful to bring in a neutral third party to facilitate the discussion. You can also schedule a session with a mediator who will try to move you toward an agreement.
At some point, you may want a recommendation from a lawyer, especially if you believe the company’s well-being is at risk or if somebody has risked legal action. You may need to talk to someone other than your usual business lawyer, who may have a conflict of interest in advising both the business and its owners individually.
It takes effort to keep a relationship healthy and productive, and your relationship with your business partners is no exception. Learning to listen and compromise, and seeking help when you need it, are keys to keeping your relationship—and your business—on track.
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