Partnership disputes can be very complicated and contentious. They sometimes lead to litigation between business partners, and they can have a long-term impact on the company itself.
One way to avoid these disputes is to write a partnership agreement in advance. You can often circumvent many of the conflicts that would otherwise arise, all by planning ahead and addressing key issues.
Ownership percentages
For instance, do not just assume that 50% of the company belongs to you. This can lead to conflicts when making important decisions or selling the company and splitting up the equity. Make sure to clearly define the ownership percentages from the very beginning, even if it is just as simple as a 50-50 split.
Roles within the business
The partnership agreement can also specify exactly what role each person has. Assumptions about roles sometimes lead to conflicts when one partner believes they were in charge of making a specific decision, but the other partner feels like they went behind their back. Overlapping roles can also lead to conflict when two parties do not see eye to eye.
Dividing profits
Finally, if the business is profitable, splitting up the revenue can sometimes become contentious if it is not defined in advance. Are you going to take an hourly wage, draw a salary or simply split up the earnings every year? There are many potential tactics, but clarity and communication help avoid conflict.
If disputes do still happen, a partnership agreement may identify potential resolution tactics that can be used. It is important for business partners to understand their legal options.