How to Mitigate Partner Disputes and Disagreements
Common issues that arise among business partners
Although unpleasant, disputes between business partners may accompany the life of a business. These interactions can often be detrimental to the longevity of the enterprise and the health of the personal relationships involved.
Occasionally, these disputes may encourage a particular individual to want to exit the partnership altogether. This is why it is important to draft a buy-sell agreement as close to the onset of launching the business relationship, since it is at that point in time that the interests of the owners are usually most closely aligned.
These agreements establish the guidelines needed to allow for exits, shareholding, and funding for purchases. They especially help you, as an owner, plan in advance for how to go about parting ways from partners after events like death, disability, divorce, or retirement occur.
Common business partnership dispute issues
However, it is important to note that creating a proper exit plan may not necessarily shield your business from disputes. Here are a few of the most common business partnership litigation that may arise from a variety of common disputes regarding a business’ exit plan.
- Business valuation for Partnership disputes
A certified business valuation by an accredited Business Appraisal FL | GA
team member takes strategic and in-depth analysis to determine an accurate estimation of a company’s worth. The process is complex and involves various considerations, calculations, and studies.
Although working with a valuation company will take several weeks, the comprehensive valuation report produced will make the wait worthwhile.
This is because appraising a company is an art — not a science — with profound implications. Here is another article on the 7 Benefits of a Certified Valuation.
Unbiased Third Party Business Valuation
Moreover, the appraisals reached by a BA F|G appraiser are independent and unbiased. For the professional appraiser to be able to conduct their research, a certain amount of data, paperwork, and financial information will need to be provided.
Regardless, determining the worth of the business is one of the most commonly disputed issues that may arise within business partnership disputes. This is because there are a variety of valuation methods that may be used to determine the true worth of a company.
This is why it is advised to include the valuation method that is most preferred to be used within the exit strategy or buy-sell agreement. Doing so will ensure that you and your partners are in agreement when attempting to estimate the company’s worth.
- Unforeseen business events
There are, of course, external events that may arise throughout the lifetime of the
business that may impact the relationship of the business partners involved.
Those sorts of events may include death, divorce or injury. Effects from these sorts of events can lead to a business needing to be sold or restructured. This is because disagreements regarding the partnership and salary benefitting heirs or spouses of a deceased or injured partner may occur as a result.
Please read the need for a business valuation as part of exit planning.
- Partnership Conflicts
Very common to many business litigation issues revolves around personal conflicts and disputes among partners. Differences in personalities and work ethics can contribute to this sort of tension.
Well-thought-out exit strategies and drafted buy-sell agreements can help mitigate these conflicts by describing what procedure will be followed to terminate or expel a partner under these circumstances.
How a business valuation can help
Although there are a variety of steps you might take to mitigate conflict between you and your partners, you should consider incorporating an annual company valuation as part of your conflict resolution approach.
An annual valuation will be beneficial if a particular partner attempts to leave the partnership after the buy-sell agreement is triggered. This is because if your company is consistently appraising its worth with experts like those at BA F|G, an exiting partner will have a much more difficult time challenging the amount or method relied upon by the appraiser.
Additionally, you can talk to the appraiser about how much data to use as part of their valuation to help mitigate disputes about the company’s value.
Using three years of data instead of a single year’s worth, for example, might help ensure that the valuation is a more accurate and fair portrayal of the company’s true value.
Partnership Issues Conclusion
Conflicts and disagreements are almost an inevitable aspect of owning a business. As a business owner, it is important to be familiar with potential sources of conflict to avoid them moving forward.
Part of this approach involves consulting financial and legal experts that can help business owners through their situation. Implementing the terms of a well-drafted and negotiated buy-sell agreement, for example, can help set you up for success.
Consulting experts like professional appraisers at BA F|G will also go a long way. Doing so ensures that your company is professionally appraised, which can help prevent and resolve conflicts that arise throughout the course of your business’s lifetime.
As a business owner, do you need help with your business valuation steps? Please call or contact BA F|G.
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