Avoiding Partnership Disputes

AdobeStock_292580187-e1576014509781-300x183A partnership is like a marriage. It takes effective communication to meet mutual goals. You can avoid many partnership disputes by creating a clear operating agreement before the partnership starts doing business. The experienced San Jose business attorneys at Structure Law Group can help you avoid unnecessary partnership disputes. By executing a clear, binding, and specific partnership agreement, you can save time and expense that ultimately hurts your business. Call (408) 441-7500 to schedule a consultation with one of our skilled San Jose business lawyers. We have helped many Northern California businesses create effective operating agreements.

How to Create an Effective Operating Agreement

There are several important steps to follow in order to create an agreement that will effectively resolve disputes in future business transactions:

The agreement must be clear.

Many partners encounter disagreements over their basic roles in the business. By clearly defining each partner’s role in an operating agreement, disputes can be addressed proactively. Partners who are involved in creating these roles – and agree to them in writing – are also more likely to have an incentive to follow the agreement and stay within these roles. Other basic issues should be clearly spelled out before the business begins operations. The name of the company, allocations of profit and loss, legal issues, tax planning, personnel management, admitting and withdrawing other partners to the business, and other issues should be addressed from the start. Forbes also recommends that partners plan for dissolving the business. While this may be unpleasant to think about, planning can make for a much smoother dissolution process. Like a prenuptial agreement, a prior agreement can save later arguments.

The agreement must be flexible.

Though certain terms must be defined clearly, other terms must allow for the uncertain nature of future business operations. An effective operating agreement should allow flexibility for adapting to market conditions, changing roles, added personnel, larger operations, and other foreseeable business contingencies.

The agreement must have a method for resolving disputes.

Like a marriage, a business will often encounter issues on which the partners simply cannot agree. An effective operating agreement can prepare for this contingency by dictating a method of resolving such disputes. The partners may agree to a tiebreaker vote by a neutral third party, or to submit to arbitration. Perhaps they will submit the issue to an expert in that particular area (such as an accountant for corporate tax planning). There are many ways to resolve disputes. If partners agree on how to handle them effectively, a dispute does not have to interrupt business operations nor ruin the relationship between the partners.

Call Us Today to Schedule a Consultation with a San Jose Business Attorney

Businesses that address disputes proactively have better long-term outcomes than those that do not. Partners can help ensure both the longevity and profitability of their business by entering into an effective operating agreement and agreeing to a method of resolving the disputes that will inevitably arise. Contact Structure Law Group at (408) 441-7500. Our experienced San Jose partnership lawyers know how to prevent business disputes and proactively address other business issues.