What to Do When a Business Partnership Goes Wrong: A Step-by-Step Guide
Running a business with a partner can be incredibly rewarding, but when things go wrong, it can quickly become one of the most stressful experiences of your professional life. Whether it’s a disagreement over the direction of the company, financial disputes, or a complete breakdown in trust, partnership disputes are more common than many business owners realise, and they can have serious consequences if not handled correctly.
Here’s a step-by-step guide to what you should do if your business partnership is in trouble.
Step 1: Don’t Ignore the Problem
It might be tempting to hope that tensions will resolve themselves, but partnership disputes rarely improve without intervention. The sooner you take action, the more options you’ll have available to you. Seeking early legal advice can often prevent a disagreement from escalating into full-blown litigation, saving you time, money, and significant stress.
Step 2: Review Your Partnership Agreement
If you have a formal partnership agreement in place, this should be your first port of call. A well-drafted agreement will set out how disputes should be handled, what happens if a partner wants to leave, and how assets should be divided. If you don’t have a written agreement — which is surprisingly common among smaller businesses — the Partnership Act 1890 will govern your relationship, which may not reflect what you originally intended.
Step 3: Attempt to Communicate
It’s worth attempting a direct conversation with your partner. Document everything in writing — emails, letters, and meeting notes — as this may be important evidence later. If direct communication has broken down entirely, the involvement of solicitors or a neutral third party such as a business mediator may be able to help facilitate a productive discussion and negotiations.
Step 4: Seek Legal Advice
Whether you’re looking to resolve the dispute amicably or you believe litigation may be unavoidable, taking specialist legal advice early is essential. A solicitor experienced in business disputes can review your partnership agreement, advise you on your rights, help you protect your assets, and represent your interests throughout the process. They can discuss various options on how to proceed to include Alternative Dispute Resolution.
Step 5: Consider Mediation
An option your Solicitor may recommend is mediation. Mediation is a confidential, voluntary process where an independent mediator helps both parties reach a mutually acceptable resolution. If successful, it’s significantly cheaper and faster than going to court, and it allows you to maintain more control over the outcome. Many partnership disputes are successfully resolved through mediation without ever reaching a courtroom.
Step 6: Protect Your Business Assets
During a dispute, it’s important to ensure that your business assets including finances, intellectual property, and client relationships are protected. Your solicitor can advise on legal measures to prevent a partner from taking actions that could damage the business while the dispute is ongoing.
Step 7: Plan for the Future
Whether the outcome is a resolution, a buyout, or a dissolution of the partnership, it’s important that you plan carefully for what comes next. This might involve restructuring your business, updating contracts, or putting a new partnership agreement in place to prevent future disputes.
Partnership disputes can feel overwhelming, but with the right legal support, you can get through them. If you’re facing a business partnership dispute, contact our team today for a confidential consultation. We’re here to help you find the best possible outcome.