How to Deal with Partner Disputes

 I saw an interesting article on the LexBlog Network regarding how to deal with partner disputes. The post written by Texas restaurant lawyer, Matthew Sanderson, dealt specifically with restaurants, but the information contained in the post is applicable to any business. Sanderson recommends the following when a dispute occurs:

  1. Avoid the conflict by identifying motivators and doing your homework;
  2. Open the lines of communication;
  3. Stand up for yourself and your rights (but don't lose your cool).

I often compare partnerships to a marriage. In any marriage good communication is essential to maintaining a happy household. Where I've seen partnership disputes fester and cause problems is when the partners fail to communicate with one another. So I think Sanderson's bullet points are right on target.

Further, a helpful piece of advice for avoiding partnership disputes is to set clear expectations of what each partner is bringing to the table. Even though it isn't a part of your typical operating or shareholder agreement, you may what a letter of understanding defining the roles of each partner. Partnerships work best when the partners have complementary strengths. For example, a strong sales person combined with strong operations or details person may have a strong partnership together where two partners with the same skill set lack the balance needed to run the overall business.

Partnerships are not easy. Be sure to have a partnership agreement in place that details what happens if a dispute occurs or the partnership ends due to death, disability or other reasons. Sanderson's last point on not losing your cool is especially important. Make sure you think things through before you react and hopefully you'll be able to avoid costly mistakes if a partnership dispute occurs.

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Jon Thompson - March 21, 2013 12:16 PM

Also, have dispute resolution in your Operating Agreement.

I have a law office client that has a rather simple debt resolution clause.

If it becomes obvious that there is not going to be a resolution on an issue, two of the partners play five rounds of rock-paper-scissors.

Their thinking is that if there is enough passion on both sides that neither is willing to cede, either is a valid option.

Rush Nigut - March 22, 2013 8:45 AM

Why not 4 out of 7? Seems much more fair.

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