How Can Businesses Protect Themselves from Partnership Disputes?

 Posted on November 15,2024 in Business Law

Two or more people who want to enter into business together can either form a company or a general partnership. Partnerships have certain qualities that might make them a more attractive option to some entrepreneurs, such as management structures and tax arrangements. They can also be a great way for people to combine skills and resources.

However, partnerships have the potential to break down and result in legal disputes that can jeopardize the business. Partners should, therefore, take extra care to prevent such disputes by following certain steps. The best way to protect a partnership from legal disagreements is to hire a Texas business litigation attorney who will guide you through the following measures.

Create a Strong and Detailed Partnership Agreement

Establishing a robust partnership agreement is one of the best ways to prevent disputes. A contract that preemptively addresses issues and defines responsibilities can forestall a breakdown in the business. A strong partnership agreement should include:

• Clearly defined roles for each partner, including decision-making processes
• A transparent ownership structure that details each partner’s share of the business profits and debts
• How the partners will seek to resolve any disputes that occur, such as through alternative dispute resolution methods like mediation and in specific jurisdictions
• Each partner’s exit strategy, including what they want to do with their share of the business if they retire

Keep Accurate Records

One of the main reasons disputes occur is because of uncertainty. Partners may have different versions of an event, for example, or something that was agreed upon. Maintaining accurate records is a great way to prevent such uncertainty because such important things get documented. When partners can easily refer back to documents, disputes can be prevented.

Maintain Frequent and Clear Communication

Communication is a key part of a successful partnership. Maintaining frequent and clear dialogue can head off or resolve misunderstandings before they happen. Regular meetings, for example, often help partners and employees clarify confusion, feel heard, and make decisions after taking different viewpoints into account. A partnership with an open-door policy for ideas and complaints is less likely to fall prey to serious disputes.

Retain Legal Counsel

Hiring a business attorney who can help guide you make decisions or advise you on the day-to-day operations of the business is a great way to mitigate the chances of disputes. Some partnerships and companies choose to hire limited general counsel to guide the business as necessary. A limited general counsel is like a chief legal officer who works part-time or on an ad-hoc basis to manage legal tasks for the business. Having a legal authority on hand to answer questions can sometimes resolve disputes before they begin or litigate any disputes if they do arise.

Contact a San Antonio, TX Partnership Litigation Attorney

Partnerships where partners have relatively equal authority can be especially prone to disputes. Hire a Comal County, TX business lawyer who can help prevent such conflicts but litigate them if they happen. Geoff Mayfield, Attorney at Law is a highly experienced attorney who understands the challenges partnerships face and can help mitigate disputes. Call 210-535-0870 now to schedule a free consultation today.