Many businesses break up because the business partners get into a dispute that they cannot resolve. They may attempt to do so for some time, but they can’t come to a compromise. Eventually, they dissolve the business entirely – or one business partner decides to leave the company, while the other person stays.
There are some ways in which creating a business partnership agreement can prevent disputes. It can also provide tactics for dispute resolution. Both of these things may be helpful in either making a business partnership more stable or working through the legal process when that partnership ends.
Addressing areas of conflict
The benefit of a partnership agreement, at least as it relates to disputes, is that it can offer definitions and address specific areas of conflict.
For instance, business owners may get into a dispute over how they are going to use the company’s money, what ownership percentages they have, who gets to make certain decisions for the business, or what their goal is for the future of that company. If the partners draft an agreement in advance, it stops them from making any assumptions so that they can address their differences upfront. If they have a different vision for what the company should be, for example, it’s better for them to know that at the very beginning so that they can decide if the partnership is even a wise decision.
What if a dispute happens anyway?
That said, just drafting a partnership agreement certainly doesn’t guarantee that disputes will never occur. When two business partners decide to split up, they must know what legal steps to take.
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