Arthur R. Lehman, L.L.C.

Planning to avoid partnership disputes

One of the major reasons business partners in New York, as elsewhere across the country, disagree with one another is because of misaligned philosophies, specifically those relating to culture, branding and growth. This can be because new partners are uncomfortable broaching these issues during the honeymoon phase of the relationship, key hires are very excited about building a product and forget the dynamic created in their contract or because partners have misunderstood personal synergy with a business relationship. By taking a few steps at the beginning of the business relationship, it may be possible, later in the relationship, to avoid partnership disputes caused by poor planning.

One of the first things partners should do before formally beginning their work is signing an operating agreement, preferably one created by an experienced professional who knows about possible causes of business litigation and how to create provisions to avoid it. In addition to this, the operating agreement should cover worst case scenarios, that is, what happens if there is a conflict, or if one person needs to be removed by another founder? Though it may make partners uncomfortable to discuss, it is important to address these issues in the onset.

A values agreement, a document that cofounders write outlining their ethical commitments to one another, is also a good idea. It allows all parties to discuss the philosophies they want to follow, the culture they want to create and leadership atmosphere they are promoting.

Addressing these issues in the beginning is one way to avoid partnership disputes caused by misalignment of philosophies. However, not all partnership disputes can be avoided, and when a New York resident finds him or herself in the middle of business litigation, he or she may want to consider consulting an experienced attorney.

Source: Forbes, "How to avoid a partnership dispute," Shane Robinson, Feb. 20, 2014

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