Going into business with others — whether in a partnership, limited liability company, closely-held corporation or other business entity — can be advantageous. Many businesses owe a good deal of their success to the benefits of cooperative management and pooling of resources. However, joint business operations can also result in disagreements, friction and deadlocks that can threaten the very existence of the company. The best way to prevent disputes from spiraling out of control is to take steps to resolve them without the need to go to court.
Dispute resolution efforts can begin when you draft the partnership, shareholder or operating agreement that governs how you and your co-owners will run your business. A well-drafted agreement should spell out the rights, duties and roles each of you will have in the company, responsibilities for making decisions, forms of compensation and profit sharing and methods of settling disagreements among the owners.
Providing a dispute resolution process is especially vital for dealing with successions in business ownership. If there are more than two owners, many disputes may be settled through majority vote. If that won’t work, the majority might choose to buy out the dissenter if the latter is willing to part ways and everyone can agree on a price.
Sometimes, however, it takes the involvement of lawyers and a third party to resolve business disputes. Whether or not an agreement requires it, co-owners can submit their dispute to a mediator or an arbitrator. These are their basic roles:
- A mediator is a neutral third party who hears from both sides and acts as a go-between to convey information, arguments, offers and counteroffers in a constructive fashion. The mediator eventually proposes a settlement of the dispute, which isn’t binding until the business owners agree to it in writing.
- An arbitrator is essentially a private judge who hears evidence and legal arguments and make a binding decision in the dispute. An arbitration is often quicker and easier than litigation and, while the arbitrators will charge the parties a fee for their services, it may save costs. Furthermore, arbitrators’ decisions are rarely overturned by the courts, because the grounds for doing so are extremely limited.
There may be other resolution methods suitable to your particular situation, such as adopting a standalone buy-sell agreement requiring individual owners to sell their shares when offered equity value. An experienced Florida business disputes lawyer can assist you in developing an appropriate process and in drafting the necessary documents.
If you’re a co-owner of a Florida business and want to learn more about ways of avoiding or resolving disputes while protecting your financial interests, H. Clay Parker, Esq. in Orlando can help. Call us at 407-216-2504 or contact us online to arrange a consultation.
