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 carries 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, and typically address:
- Dispute-resolution strategies
- Process in the case of deadlock
Therefore, the importance of potential partners to have an attorney draft a fair, and complete partnership agreement cannot be over-emphasized. Similarly, partners should always consult the partnership agreement to determine how to move forward in the event of an impasse.
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 should do.
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:
- They must always put the interests of their business first
- They should try to 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.
