Common Tools Partnerships Use to Resolve Disputes

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Common Tools Partnerships Use to Resolve Disputes

In business, choosing the right partner is essential for the success of your endeavor. However, when there is more than one person running a business and making important decisions, it is imperative that certain issues be addressed — especially those dealing with the resolution of potential disputes. These issues can be addressed in a partnership agreement.

There are a number of essential items that should be included in your partnership agreement, including:

Contributions. It is important to identify the details of each partner’s finances so you both understand how much each partner is contributing to the business. Additionally, the agreement should spell out what each partner’s responsibilities will be for making future contributions to the business – both financially and otherwise.

Ownership. No matter how much you may like your business partner or your business itself, sometimes things happen. They may be exciting things, like taking on a new business partner or even multiple partners. They may be planned things, like selling the business. Or they may be unforeseen things, like your partner deciding to withdraw from the business. Regardless of what happens, it is important to determine who gets what if the business ownership changes in any way.

Decision-making. Just in case you and your partner don’t agree on everything (you won’t), you need to determine how decisions will be made on both a day-to-day and long-term basis. It’s important to define what kinds of decisions need to be agreed upon by both partners, and which decisions can just be made by one partner alone.

Distributions. Your partnership agreement should very clearly state how each partner will split the business profits. This includes who gets paid, how much they get paid, and when they get paid. It’s also important to specify if each partner gets paid an hourly wage or a salary, and what the total amount of their earnings will be.

Critical developments. This is where you and your partner plan for the unpredictable, such as what happens if a partner gets sick or passes away or if someone buys out your business. Be sure to include any other circumstances or issues you can think of.

Dispute resolution. It’s a pretty safe bet that you won’t agree with your business partner on every single matter. Because of this, it’s essential for your agreement to have a section dedicated to dispute resolution. This means you need to clearly lay out the mechanism for how disputes will be handled between partners.  Some of the most common tools used by partnerships for dispute resolution include:

  • An advisory board with experienced outside advisors who can provide guidance on conflict resolution
  • The inclusion of a tie-breaking provision that resolves disputes by vote — either a person or group
  • Requiring disputes to be resolved via mediation or arbitration

Dissolution. Finally, your partnership agreement should include what steps will be taken to legally end your partnership if or when that time comes. Your business attorney can advise you on what Arizona requires to dissolve partnerships.

Williams Mestaz, L.L.P., provides strong legal advocacy for companies involved in business lawsuits. We are known for using our skills, experience, and cutting-edge technology to get great results, whether after trial or through a favorable settlement. Call us today at (602) 256-9400 and schedule an appointment to meet with us about your case.

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