All relationships change over time. People get married, then divorced, then married again. Children grow up. Best friends may grow apart. Colleagues who are thrilled for the chance to collaborate may find that working together feels like the longest, least enjoyable group project ever.

How we handle disagreements and disputes in our relationships has a major impact on what those relationships look like moving forward.

This includes business partnerships.

Like a marriage, disputes between business partners can have a major impact across all aspects of our lives, from financial to legal to mental health. So, how can you handle disputes in your business in a way that supports the best possible outcome?

4 effective strategies for handling business partnership disputes 

1. Revisit your partnership agreement

When business partners hit a rough patch, the partnership agreement can be one of the most useful tools for finding a way forward. It’s where you agreed—back when things were running smoothly—on how to handle decisions, responsibilities, and potential conflicts.

Start by reviewing the sections that deal with daily operations and conflict resolution:

• Who’s responsible for what? If one partner feels they’re carrying more weight, the agreement should clarify roles. This can allow for adjusting workloads, revisiting compensation, or bringing in extra support.
• How are decisions made? If you’re stuck on a major choice, check the agreement for decision-making processes. Some agreements assign tie-breaking authority to one partner, while others require mediation before moving forward.
• What happens if someone wants out? If the dispute is heading toward separation, the agreement should outline buyout terms, ownership rights, and how to transition without disrupting the business.

The agreement is intended to keep tough conversations focused and productive. However, if the terms no longer reflect how your business runs, it might be time to update them with the help of an experienced business contract attorney.

2. Evaluate how you’re communicating

Like any relationship, communication is often the most important factor in fostering a healthy one and the key to amicably resolving disputes and disagreements. While it may seem like a simple solution, frequent and open communication is one of the best ways to keep all parties in agreement or on the same page regarding a business issue.

Setting up regular meetings to discuss your business and partnership may be a good idea, especially if you work remotely or don’t see your business partner frequently. Whether it’s a working lunch or a fifteen-minute morning check-in, these moments can help you create a habit of communication and keep each business partner aware of the major issues facing the business at any given time.

For a specific dispute, clear and honest communication, while intimidating, can sometimes be the simplest way to resolve a dispute.

To resolve a dispute, it’s important to approach the conversation with mutual respect and an honest, good-faith desire to arrive at a solution that works for all parties. Use these strategies:

• Choose a starting point with common ground, such as your desire to support the best interest of the business.
• Listen to the concerns of your partner without interruption or negation.
• Make sure each party feels heard and their perspective valued.
• Focus on the facts of the dispute rather than emotions stemming from the disagreement.
• Consider if there is a compromise that can address the most critical concerns of each party.
• Build a plan to resolve the issue, and check in regularly regarding progress on that plan.

Consider hiring a third-party mediator if a solution requires a longer negotiation process.

3. ADR: Utilize a mediator if necessary or an arbitrator

A mediator is a neutral third party who can help business partners talk through their disputes and arrive at a mutually agreed-upon resolution. They can be especially helpful if tensions within a partnership are high, but both parties want to avoid legal action or dissolution. While they may have a cost, they are more cost-effective than going to court.

However, it’s still important to retain legal counsel throughout the mediation process. A mediator is neutral, meaning their role is not to ensure that you understand your rights or have a clear strategy for advocating for your interests.

What if mediation doesn’t work? 

If mediation doesn’t work, consider a more formal method of resolution, such as arbitration. While less formal than going to court, Arbitration still relies on an impartial third-party industry specialist to offer a legally binding final resolution. It’s like having a private judge.  This can sometimes get you finality on a faster timeline. 

Arbitration can be tense because it creates a legally binding decision for your business partnership. That said, it does maintain privacy that may not be available should either party resort to litigation.

4. In extreme cases, legal action or dissolution is possible

Litigation is often seen as the last resort in a business dispute because it is costly, public, time-consuming, and difficult to come back from for any business relationship.

While it’s important to work with trusted legal counsel at any stage of a business dispute, working with an experienced business litigation attorney is imperative should either party resort to litigation.

In litigation, the court will consider evidence and arguments from all parties in the dispute to arrive at a fair decision. Experienced legal counsel can help you navigate the process, understand and anticipate potential outcomes, and develop a strategy to achieve the best possible outcome.

Depending on the circumstances, a court may determine that the partnership must be dissolved or that one party must buy out the other. A partnership agreement is critical here because, as a legally binding document, it can impact the court’s decision and the outcome.

A Texas business litigation attorney can help 

An experienced business attorney can help protect the business and your role by crafting partnership agreements, contracts, and business planning at every stage of a business partnership, including disputes.

Contact the business litigation attorneys at the Law Offices of Shann M. Chaudhry, ESQ., to schedule a consultation and learn how we can help you navigate a business partnership dispute.