How to protect yourself from being sued in a business partnership

On Behalf of | Sep 5, 2023 | Business Disputes |

A business partnership is much like a marriage. Two people commit to working together for the indefinite future to achieve shared goals. They combine their financial and legal risk with one another while benefiting from each other’s resources.

Also like marriage, which may end in divorce, business partnerships sometimes end in bitter buyouts or litigation between partners. As a result, someone who is thinking about entering a business partnership or is worried about the status of an existing partnership arrangement may have an interest in actively trying to protect themselves from litigation initiated by their partner.

Protecting against conflict in a partnership agreement

Putting together a comprehensive partnership agreement before committing to starting a business with someone is a smart move. Partners can include terms in their contracts that can greatly reduce the chance of litigation in the future.

For example, they might require an attempt at alternative dispute resolution before either partner attempts to take a matter to civil court. They might also include non-disclosure agreements in their contracts to prevent either partner from sharing personal information or details that could damage the business in court, online or elsewhere that the public could access that information.

Finally, they may include very clear instructions for how to proceed with a buyout should either partner want to assume sole control over the company, which can be an effective means of preventing litigation at the end of a business relationship.

Finding ways to settle amicably

Perhaps partners did not sign a comprehensive contract with each other, or maybe their agreement simply does not include provisions about a buyout or resolving conflict. Even if there isn’t a requirement to attend mediation or attempt to collaborate to resolve the matter, it might be smart of one partner to suggest that approach to the other.

Provided that both are willing to compromise to some degree, it may be possible to resolve the conflict between the two partners in a way that preserves their relationship or at least protects their privacy and their company’s reputation.

Those who worry that a lawsuit related to their partnership could be in their future could benefit from exploring all of their options. Being proactive about avoiding litigation can help people minimize the expenses generated by a conflict with a business partner.