How Do You Avoid a Dispute with Your Business Partner?

The breakup of a business partnership can be as traumatic and expensive as a divorce. Although there’s no way to guarantee that a dispute won’t take your business to the brink of failure, here are a couple of steps that can minimize the chance that a fight with your partners will sink your business:

1. Put the right documents in place. Sadly, business owners often skimp on the setup of the business. Every type of business entity has a mechanism for governing the operation of the business and the relationships between the owners. For LLCs, the document is called an “operating agreement.” Partners in a partnership can enter into a partnership agreement, and shareholders in a corporation can agree to bylaws that govern the operation of the business. Each of these documents is essential for the smooth operation of the business; unfortunately, however, many businesses operate by the seat of their pants, without necessary governing documents. Without a clear guide to resolve the differences, a minor dispute between owners can end in a nasty breakup.

2. Keep the lines of communication open. Like a marriage, a strong business partnership requires open communication from all the owners. Wounds can fester, leading to an unstable relationship between the owners. For example, if a partner feels like he or she is putting in all the effort and reaping none of the reward, there’s a good chance that the business is in serious trouble. If you get to the heart of that matter early, you may be able to salvage the relationship.

3. Get advice from an experienced business attorney. Entrepreneurs tend to have a do-it-yourself attitude, but that can be disastrous when it comes to your business’s legal matters. Making the right decisions from the beginning of a business relationship goes a long way toward keeping the relationship strong.

If you suspect that your business relationship is headed in the wrong direction, it’s important to get counsel early. Wait too long, and your business relationships may no longer be salvageable, costing you needless time and money. And if you are already facing a dispute, an experienced Houston business dispute attorney can help you navigate your situation to the best resolution possible.