How to Quickly and Easily Avoid Disputes with Your Business Partner

Not having a buy-sell agreement with your business partner is a critical mistake that so many business owners make. Whether you are partners, shareholders in a company, or unitholders in a unit trust, you should have a buy-sell agreement.

Avoid disputesA buy-sell agreement won’t completely avoid disputes between you and your business partner, but it will give a framework on how to easily resolve disputes or dissolutions. You will work this framework out together whilst the relationship is rock solid and fine, so neither of you can claim that it is unfair later.

Things that are sometimes assumed at the beginning of a business relationship, but shouldn’t be, include:

  • the date the partnership needs to be reviewed
  • describing the partners or shareholders contribution and equity
  • establishing how the bank account operates and placing a cap on the cost of decisions
  • establishing a limit to personal guarantees
  • establishing a dividend and compensation policy
  • establishing a policy for a right to inspect the business records and get an audit
  • establishing insurance coverage for the partners, and dates when these should be reviewed
  • establishing provisions for partners:
    • if they wish to retire
    • if they wish to withdraw equity
    • if they want to expel a partner
    • if they want to sell to an outsider
    • if they lose their professional licence
    • if they go bankrupt
  • establish a method of valuing the share of a partner who retires, dies, or becomes permanently disabled
  • establish right and options for surviving and remaining partners
  • establish non-competition terms
  • establishing a dispute resolution process

If you deal with these things up front, then it is less likely that you and your business partner will have a major dispute or falling out that leads to litigation.