Introduction
Business associations are as old as the very idea of business. Doing business with like-minded people who share your interests is financially and emotionally rewarding. The benefits of merging your work and capital with others outweigh the risks. However, those risks will not go away. If not managed correctly, they can turn into disputes, ruining your partnership and dreams of a thriving business career.
This article will underscore the root causes of partnership conflicts and offer tips on avoiding them while pointing to the most effective method for resolving partnership disputes in Florida.
Florida Partnerships: Effective Business Growth Solutions
Thriving in a free-market economy requires cooperation between multiple individuals and companies. Partnerships are a legal form that provides an ideal risk-reward ratio, enabling business-oriented people to achieve high profits with minimal risks. In Florida, partnerships are for-profit associations between two or more people.
The Anatomy of Partnership Disputes: Understanding the Root Causes
Doing business has its difficulties. Market crises and changing customer preferences can cause downfalls leading to disagreements between partners. As your business evolves, partners often develop diverging views about overall business strategy and policy goals. While minor disagreements rarely result in disputes, conflicts over basic principles, which your cooperation rests upon, are the root cause of partnership disputes.
The most common reasons leading to partnership disputes in Florida include the following:
- Business management. Running a business together requires constant coordination and alignment between partners. The conflict arises when partners start to have diverging views on how to proceed with business operations.
- Resource allocation and distribution. Having different views about some aspects of doing business is natural and does not put partnerships at risk. Resource allocation and distribution are not one of them. These are vital decisions partners must agree on. Otherwise, they risk losing their business due to a dispute.
- Partner misconduct allegations. Partners commit to upholding specific professional and ethical standards. Any misconduct (financial or other) can generate disagreements, leading to disputes.
- Workload imbalance. Partnerships rest upon a premise of equal work and capital investments. Putting in less than your partner except or require will result in conflict.
- Partnership agreement terms disputes. A partnership agreement lays out the general terms of your business enterprise. Disputes arise when partners disagree on those terms.
The Power of Prevention: Tips for Avoiding Partnership Disputes in Florida
A partnership agreement is the foundation of every partnership association in Florida. It defines mutual rights and obligations, deals with assets and liabilities, and with dispute resolution. A good partnership agreement is the best safeguard against potential disagreements that lead to disputes. Although it cannot prevent conflicts, clear and concise provisions can minimize the risk of escalation. Below are the tips on how to draft your partnership agreement to avoid potential disputes:
- Hire an Experienced Attorney
Drafting partnership documents requires professional legal skills. A partnership agreement and an operating agreement are two documents that set your business operation in motion, defining each partner’s place within it. To ensure these documents comply with the law (while reflecting your business interests), hire an experienced attorney to help you draft them. If you are new to the partnership, your lawyer can help you review the partnership documents to ensure everything is in place.
- Assess the Effectiveness of Dispute Resolution Clauses
Partnership documents should have dispute resolution clauses. Go through these provisions and ensure they provide effective dispute-resolution mechanisms. If not, amend them accordingly. When updating dispute-resolution clauses, hire an attorney to help you find the best viable solutions. For obvious reasons, which should not be the attorney who drafted the original documents.
- Define Expectations
As previously discussed, partnership disputes can occur due to disagreements regarding workload allocation. To avoid that, discuss all the aspects of shared business. Define what you expect from each other regarding work and other investments. That will eliminate potential resentment that can grow into frustration and an open conflict over time.
- Create a Buyout Agreement
A buyout agreement deals with how partners can buy out a partner. The contract (or a clause) defines terms and conditions for buying out or forcing out a non-performing partner from the partnership (who refuses to leave voluntarily). Ensure that you and your partners establish clear rules for doing this and, if necessary, hire a lawyer to help you draft the appropriate clause.
- Discuss Important Business Decisions
Performing day-to-day business activities requires flexibility. You must trust your partners’ good judgment and let them conduct regular tasks independently. But some decisions are too important to be left to one partner’s discretion. Define the vital issues and business operations that require a consensus between partners and establish effective procedures for getting approval.
- Put Important Things in Writing
Despite developing trust and respect over years of doing business together, partners should specify which agreements and decisions must be in writing. That should not compromise your friendship and mutual affection – it is just an extra precaution that will prove beneficial should the dispute arise.
Negotiating Your Way Out of Dispute: Partnership Disputes Mediation
As opposed to litigation, mediation offers numerous advantages over conventional trials. The most common are time and cost-effectiveness, neutrality, confidentiality, and mediation’s reconciliatory powers, making it the most effective partnership dispute resolution method.
Key Takeaways
- Partnerships are for-profit associations between two or more people.
- Partnership disputes typically arise from management disagreements, resource allocation conflicts, partner misconduct, workload imbalance, etc.
- To avoid or at least minimize the possibility of partnership disputes, hire an attorney to help you draft partnership documents, establish a buyout agreement, review dispute resolution clauses, discuss important business decisions, and define expectations.
- Unlike ineffective litigation, mediation offers neutrality, confidentiality, time and cost-effectiveness, and reconciliation between conflicting parties.
Bringing Harmony Between Disputed Partners: Florida’s Seasoned Business Mediator
More than any other business association, partnerships rest upon mutual trust and respect between partners. When that trust is gone, the business can no longer thrive.
Hal Wotitzky is the Supreme Court of Florida certified mediator with decades of valuable experience mediating partnership disputes. Hal knows the importance of trust and can help you restore that trust, bringing you and your partner behind the steering wheel of your growing business.
Please reach out today to schedule your appointment. Call us at (941) 621-4249 or email at Hal@WotitzkyMediation.com.
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