Deadlock does not have to be the end of partnerships

| Apr 28, 2021 | business litigation

Regardless of the company’s size, business partners frequently believe that a 50/50 partnership is the fairest and most effective arrangement. That way, they both maintain equal power and say over the direction of this shared dream and effort.

Even so, every 50/50 partnership does carry the risk of deadlock. Most business owners are familiar with this issue, when two business partners cannot agree on a decision and, in turn, cannot move forward. This can have a considerable impact on the business as a whole, especially if these decisions are strategic or financial. So, how should business owners approach a deadlock?

Always refer to the partnership agreement in deadlock

As we have discussed in previous blog posts, it is often in California business partners’ best interests to establish a partnership agreement. Having written agreements partners can refer to is critical. After all, partnership agreements usually:

  • Address dispute-resolution strategies
  • Directly discuss what to do in case of deadlock

Therefore, partners should always consult the partnership agreement to determine how they will move forward.

Commit to negotiating – at least in the beginning

By the time business partners reach a true deadlock, they have often attempted to negotiate. Even so, business partners should still attempt to negotiate a solution again before turning to litigation.

It is often helpful to negotiate in a formal setting with an experienced business attorney or another neutral third party. Most business partners do not want to put their shares, ownership or business in jeopardy. Additionally, taking matters to court is often the last thing that business partners want to do. So, seeking a solution through negotiation is often a step business partners prefer.

Two critical reminders when dealing with deadlock

Regardless of how business partners approach deadlock or even a minor dispute, they must keep two things in mind throughout the process:

  1. They must always put the interests of their business first
  2. They should remain professional at all times

These reminders might be unnecessary, but they always bear repeating. Putting the business first can often help partners find a solution that can work for the whole business as they move forward.