For many business owners, litigation is often part of the cost of running a business. In some cases, a dispute may be unavoidable. However, you can make preparations to help protect your interests. Understanding some common sources of business disputes and how to address potential issues can save you significant headaches down the road.
1. Not having a written partnership agreement
You may not have a board of executives or multiple shareholders to whom you have to answer. However, you may have a business partner or partners. You may have gone into business on little more than a handshake and a spoken promise.
While you don’t need a written partnership agreement to form a business, it’s always a good idea to have one in place. A partnership agreement makes clear each party’s investment. It should also address the division of profits and losses. You should also lay out the steps for what happens if one partner steps down or if you decide to close up shop. If you’ve already formed a business and don’t have a written partnership agreement, don’t despair. You can craft a partnership agreement at any time over the life of your business operation.
2. The lack of employment contracts
You should have every person you hire sign an employment contract. The contract should include information about wages, benefits, scheduling, and job duties. You should also have an employee handbook that addresses the grievance process should problems ever arise. This can help protect you if you ever need to terminate an employee or are being threatened with a lawsuit.
3. Not having purchase and sales agreements
Contracts are the lifeblood of any business. You should have purchase and sales agreements in place that define the price, when goods are expected to be delivered, and what the process is if one party fails to perform under the contract. You may not be able to avoid a contract dispute. However, having an understanding of each party’s duties can make it easier to reach a resolution.
Preparation is essential
Forethought and planning can help you avoid many common business disputes. A skilled legal professional can help you with your business planning needs.