Common mistakes that lead to partnership disputes

On Behalf of | Jan 19, 2022 | Business & Commercial Law

Starting a new business is exciting, and pooling your talents and resources with a partner can help to ensure the success of your venture.

Unfortunately, an estimated 70% of business partnerships fail, according to Inc. Avoid these mistakes that can lead to partnership disputes and potentially spell the end of your company.

Assuming you can work well with a friend

Too many people assume that a good personal relationship will translate to a functioning professional relationship. If you are considering working with a friend or family member, you should carefully consider whether your goals, work ethics and business values align.

Failing to define roles

Many disputes that arise between partners do so because the partners were not clear on who was responsible for different aspects of running the company. You should define each partner’s role and set expectations from the start, ideally at the same time you develop your partnership agreement.

Allowing problems to fester

When you have concerns about your business or partnership, you need to work to resolve those concerns right away. Unaddressed problems tend to grow exponentially worse over time and can lead to resentment between you and your partner.

Relying solely on informal resolution measures

When you create key organizational documents, like your partnership agreement and business plan, you should also develop a formal process for resolving any questions that fall outside either partner’s clearly defined authority.

Sometimes, disputes require a legal remedy. However, if you take steps to prevent conflict, you can help to ensure that neither you nor your partner needs to seek such remedies.