Going into a business with a partner can be advantageous in many ways, with both owners bringing unique skills and giving them the ability to divide responsibilities. Ideally, anyone forming a business with a partner will trust the partner and be confident in their ability to agree and continue with compatible visions and goals for the company. This is especially true for a lot of closely held companies where the partners are close friends or family. Unfortunately, even business partners who historically have always agreed and had the same interests disagree or have falling outs. Here is what you can do to protect yourself from headache if disagreements with your business partner arise in the future:
- Plan for disagreements while forming your company: When forming a company, you and all other forming partners will create articles and bylaws that outline the parameters of how your business will operate. To help facilitate future disagreements or issues arising between you and your partners, these should include rules on how to handle disputes and a process for buying out a partner’s shares in the company..
- Try to Negotiate: When disputes arise, try to come to an agreement. The best solution to business disagreements is to come to an understanding without having to make drastic changes such as a buy-out, litigation, or dissolution of the business.
- Explore buy-out options: Sometimes, negotiations do not work. In this case, business partners should explore buy-out options that will allow them to split business ties. In a buy-out, the partner who is not in agreeance or has had a falling out is “bought out” by the remaining partners. The buy-out is completed in accordance with the company bylaws, which may dictate the processes for sale and appraisal.
- If all else fails, litigate or dissolve the company: If you and your business partner(s) have tried all other resolutions and still cannot come to an agreement, you may use the court system or arbitration to resolve the dispute or dissolve the company.
Taking the proper steps to ensure that your business will survive disagreements between partners is crucial to consider starting at formation. The attorneys at Simpson, Jensen, Abels, Fisher & Bouslog, P.C. are experienced in handling complex business issues. Contact us at (515) 288-5000 to discuss your business with our firm.
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