Business partner disputes are known to escalate quickly for a few reasons. Disagreements over money, authority, or general business direction are known to become intense. Litigation also gets expensive and can damage long-term business value. Luckily, there are ways for business owners to tackle these disputes early on to reduce the risk of a lawsuit.
Identify the Root of the Cause of the Dispute Early
Many business partner disputes can escalate because of underlying issues not being properly addressed. A disagreement over minor day-to-day operations can turn into accusations of mistreatment. Typical causes of conflict include unequal workloads, compensation disagreements, or conflicting visions pertaining to the company’s future.
Make sure you take the time to pinpoint the root cause of the problem as early as you can so that you minimize misunderstandings from turning into intense problems. Having open and honest communication before emotions come into play can make all the difference. Ignoring the issue at hand can lead to repeated conflicts that eventually turn into legal action.
Communicate Carefully and Document Everything
Clear and professional communication is essential when a business dispute begins. Conversations should remain focused on business matters as opposed to personal issues and all highly emotional or inflammatory language should be avoided. Things like emails, text messages, and general written correspondence can become evidence if a dispute escalates so making sure that you are communicating in a thoughtful and factual way will only help you in the long run.
Documenting all key decisions regarding financial transactions and agreements helps to create a crystal-clear picture record of the events that occurred and therefore protects you from any false claims. Not only does consistent documentation support transparency between partners, but it acts as valuable context if legal guidance becomes necessary.
Considering Mediation and Understanding the Law
Mediation and other forms of dispute resolution that don’t involve lawsuits can be effective tools for resolving business partner disputes before they reach that state. In Michigan, mediation is commonly encouraged as a cost-effective and confidential way to handle disagreements among business partners with the help of a neutral third party. Mediation also allows partners to have more control over the outcome and to explore creative solutions that are focused on the needs of the business.
It’s also important to understand the law. The Michigan Limited Liability Company Act helps to provide protection for owners against company debts. The Michigan Business Corporation Act provides a structured legal framework as far as business rights, regulations, and management is concerned. Michigan Business law also gives the following fiduciary duties to business owners:
(a) The duty of care.
(b) The duty of loyalty.
(c) The duty of confidentiality.
If significant disagreements between partners begin to arise, having a baseline knowledge of these laws can put you in the best position possible. Keep in mind that mediation also helps in reducing legal costs and preserving these business values.
When Litigation May Be Necessary
Despite best efforts to resolve the disputes informally, there are some situations that do require court action. It becomes unavoidable when there are serious allegations like fraud, misappropriation of company funds, or deadlock that threatens the business. In these cases, litigation not only protects the company, but the individuals involved as well.
Even when litigation is unavoidable, preparing early can truly make a significant difference. Preserving your records, understanding your legal obligation and consulting with an experienced counsel can help ensure that the dispute is handled strategically and properly.
Seeking Legal Guidance
Having a legal team that has experience with dealing with business litigation will put you in the best position that you can be in should you need it. Duff Law PLLC located in Grand Rapids, Michigan has just that. These attorneys work to protect business interests while pursuing solutions that avoid unnecessary litigation whenever possible. Make sure you reach out for your free consultation as soon as you can.