Running a sole proprietorship means that you are in charge; launching a partnership means that you now have to work with other people to make your business successful. At the Aldrich Law Firm, Ltd., we know that making important decisions with people who may not agree with you can be difficult. In worst-case scenarios, it can lead to a legal dispute. There are, however, some steps you can take to mitigate the risk of costly litigation.
As the U.S. Small Business Administration points out, there is no requirement that people going into business together also enter a partnership agreement. However, such a contract is highly recommended. These documents can provide you a great deal of protection as well as do the following:
- Outline what each person’s role in the company is
- Determine how disputes will be resolved
- What happens if a partner passes away
The second point – dispute resolution – can detail whether or not partners can go to mediation in an effort to avoid the courtroom. It may be beneficial to hire an attorney who can review the partnership agreement as well as provide advice as to how the business should operate.
Additionally, partners must be open to speaking about differences in a respectful manner. Having regular meetings among partners to discuss current operations and future goals can keep everyone in the loop and ensures any potential issues are discussed immediately.
Lastly, having a strong advisory board can provide partners with other professional voices to weigh in on conflicts. An advisor who knows the business and the partners can help give timely and necessary advice.
For more information regarding this topic, please visit our page on commercial law matters.