The U.S. Small Business Administration ranks disagreements among partners as one of the top reasons why general and limited liability partnerships fail. In the case of financial reporting, these small business partnership disputes often center on compensation, access to records, accounting irregularities, breach of fiduciary duties and misrepresentations. They may even involve allegations of fraud. If you are involved in a financial dispute with your partner, follow these steps for the best resolution.
Partnership disputes typically stem from either a lack of trust and respect or a perceived difference in contributions versus rewards. When you are involved in a disagreement, avoid the urge to send terse emails, storm into offices or use family members against one another. Instead, take this advice from CPAs, lawyers and mediators who have handled these situations before:
If you cannot resolve your differences on your own, then enlist the help of a neutral third party. For minor conflicts, another business partner or mutual friend may offer assistance. Lean on professional advisors who have seen these types of partnership disputes before. For more important matters, go to a mediator. A trained mediator will take a neutral position, remove heated emotions and suggest mutually beneficial strategies for moving forward.
If you still cannot come to an agreement, consult a legal professional. An attorney can guide you through alternate options to avoid a costly litigation. You can learn about your rights and obligations with regard to staying in the partnership or getting out of it. For example, you may not be able to terminate a dishonest partner without following certain procedures and conducting a buyout. By getting legal help, you can also fix the operating agreement so that similar situations do not occur in the future.
In the end, take these steps to discourage animosity and drive a productive outcome. Even if the relationship cannot be saved, you have the tools you need to resolve financial disputes with your business partner.
At Verdeja, De Armas & Trujillo, LLC, our team of Miami business advisors is dedicated to providing you with independent and unbiased valuations for businesses and business interests of all sizes. Contact us today for a small business valuation consultation.