Your Options for Settling Disputes with Business Partners

Disputes between business partners can disrupt operations and tarnish relationships. Whether it’s a difference in vision, financial concerns, or operational roadblocks, these conflicts can threaten the very foundation of your company. When these rifts arise, you must address them quickly to prevent escalation into bigger threats.

How Can You Resolve Business Disputes?

The importance of resolving disputes promptly cannot be overstated: drawn-out conflicts can drain your resources and disrupt operations, potentially impacting your bottom line. In addition, letting tensions go unaddressed can lead to legal battles, damaged reputations and further financial strain.

Before resorting to drastic measures to resolve the issue, explore options that prioritize preserving your business and the value you’ve built together with your business partners. Here are some common avenues for dispute resolution.

Negotiation

Negotiation is often the first step to resolving business disputes. Sometimes, the initial partnership agreement may not adequately address unforeseen circumstances and can be revised to address current issues. These may include re-evaluating provisions such as:

• profit-sharing ratios
• decision-making processes
• roles and responsibilities within the company

Direct communication allows partners to work toward a mutually beneficial solution. Negotiation is the most cost-effective dispute resolution method to preserving the business relationship.

To negotiate effectively, it’s important to be prepared, understand the other party’s perspective, and aim for a win-win outcome. Listening actively and focusing on the business’s best interest can help you negotiate effectively.

Mediation

Mediation involves a neutral third party who facilitates discussions between disputing partners. The mediator encourages open dialogue and guides the parties toward an agreement.

Mediation offers several advantages, such as confidentiality and flexibility. It is also less formal and less costly than litigation. The mediator doesn’t impose a solution but rather guides the conversation towards a mutually agreeable outcome.

Arbitration

Arbitration is a more structured process where an arbitrator hears evidence and arguments from both sides before making a decision, which can be binding or non-binding. This method is often preferred when the parties only want guidance or are seeking a resolution without going to court.

Arbitration combines the benefits of a formal legal process with flexibility and privacy; however, it can be more expensive than mediation, and the decision is typically final with limited grounds for appeal. Non-binding arbitration provides a neutral assessment and recommendation but can potentially lead to further negotiations or litigation if the partners reject the outcome.

Litigation – If an agreement cannot be reached

Litigation involves taking the dispute to court where a judge or jury makes a binding decision. Going to court can provide a clear, enforceable resolution and is backed by the authority of the legal system; however, it is time-consuming, costly, and can strain your relationships with employees, clients, and vendors.

What Are the Possible Outcomes of Litigation?

Potential outcomes of litigation can vary. For example, the judge could:

• order dissolution of the partnership, or
• appoint a receiver to oversee operations, or
• award monetary damages to some parties.

Alternative Dispute Resolution (ADR)

ADR encompasses various techniques such as mediation, arbitration, and hybrid methods like med-arb (mediation followed by arbitration). These methods offer more control over the process and can be tailored to the specific needs of the dispute. Choosing the right ADR method depends on factors such as:

• the nature of the conflict,
• the relationship between the parties,
• how quickly you’d like to reach a resolution.

ADR can often save time and money while reducing the emotional toll of disputes.

Why Work with a Business Lawyer to Resolve Your Dispute?

Your livelihood and business can be jeopardized if a dispute with your business partners arises. With so much at stake, seeking legal counsel from an experienced business law attorney is wise.

A lawyer can  help you choose the most suitable resolution method, represent your interests, and help draft clear agreements to prevent future conflicts. A good attorney will advocate for you as well as ensure you understand your options and guide you to make informed decisions.

Preventive Measures

While navigating disagreements with business partners is a valuable skill, there’s an even better approach: preventing disputes from arising in the first place. Here are some proactive steps to take to pre-emptively avoid partnership conflicts.

• Align your vision and goals: Before diving into business, have a frank conversation about your individual and collective vision for the company. Discuss long-term goals, risk tolerance, and growth strategies.
• Iron out the details in a comprehensive agreement: Your partnership agreement should outline ownership percentages, profit-sharing structures, and decision-making protocols. Even though it might be uncomfortable, discuss how to handle deadlocks or the process for a partner’s exit from the business.
• Maintain transparent finances: Implement a system for financial management with regular reporting and open access to financial records for all partners. Consider working with a third-party accounting service to ensure impartiality and build trust.

Call TLGNWA Today for Help with Business Dispute Resolution

If you’re considering entering into a business partnership or are currently facing unresolved disputes with your partner, don’t hesitate to seek professional guidance.

The business law attorneys at the Law Group of Northwest Arkansas PLLC have a proven track record of helping businesses navigate complex legal issues, including dispute resolution. We’ll answer your questions and help you find the best path to resolving your issue.

Call today at 479-316-3760 or contact us to schedule a consultation.