Going into business with a longtime friend or a coworker at your former
job can be a great idea. Your partner’s strengths may compliment
your weaknesses, and two heads are often better than one.
It also helps to have someone whose financial resources can help you start
or buy a business or franchise.
A partnership can be an excellent collaboration, however, it is not uncommon
for disputes to arise between even the closest of partners. One can even
have a dispute with a partner who they have known since grade school,
someone they deeply respected and trusted.
Much like a painful divorce, a partnership dispute can turn into one of
the bitterest disputes you will experience in your lifetime.
Can you avoid a partnership dispute? Absolutely, however, it will require
patience, a small financial and time investment on your part, and some
effort in the early stages of your partnership.
Here are some things that you can do to prevent a partnership dispute and
potentially resolve one if it does arise:
1. Establish a written agreement.
If you are entering a partnership, ensure that you have a written agreement
in force. Depending on the type of business you have, you will need a
partnership agreement or an operating agreement.
Such an agreement will clearly define each partner’s role, compensation,
and under what circumstances the partnership will be terminated etc.
2. Retain an attorney to assist you with preparing the partnership agreement.
To prepare an ironclad operating or partnership agreement, have an experienced
business law attorney assist you in preparing the document.
We advise against creating an agreement from scratch or using a template
found online. You should have an attorney assist you in tailoring a legally
sound agreement that clearly defines your goals.
3. When you discuss the dispute, focus on finding a solution.
If you encounter a dispute, set aside a time outside of the busy work
day to sit down and have a calm, rational conversation that is free of
During this conversation with your partner, make an effort to focus on
solutions rather than pointing fingers and focusing on the problem. A
good faith effort at resolving the dispute may stop a legal battle in
4. If the dispute won’t resolve, consider hiring a mediator.
If you and your partner cannot resolve your differences, consider hiring
a neutral mediator to help you resolve it. In fact, many operating agreements
contain provisions that require mediation to resolve differences among partners.
5. If you cannot resolve your differences, contact a lawyer.
If you and your partner simply cannot see eye to eye and your disagreement
is taking a turn for the worse, contact an attorney right away. The sooner
you get legal help, the better.
If you need professional guidance creating an
operating agreement or
partnership agreement, or
resolving a partnership dispute,
contact the Chicago business law attorneys at Rifkind Patrick LLC today.