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What to do when a business partner impedes company growth

On Behalf of | Dec 18, 2014 | Business Formation & Planning |

Many Michigan businesses run into trouble when one partner fails to perform. Partners may become unfocused and fail to contribute, or they may actively make poor decisions that affect their companies’ health. The remaining partners in a business may be unable to continue doing business without taking action to either encourage the non-performing partner to become a valuable part of the business or force them to leave.

Companies often benefit from attempts to solve business disputes through conflict resolution. Bringing in a neutral party, such as an arbitrator, may help facilitate communication and prevent problematic situations from escalating. Arbitrators and other qualified third parties hear all partners’ grievances and make recommendations based on the evidence. Partners may be legally required to comply with the decisions reached during this process depending on whether they chose to take conflicts to binding or non-binding arbitration.

If disputes have already become too serious to submit to third-party mediation or if alternative dispute resolution has already failed to produce results, other actions may be more appropriate. For some businesses, a majority vote may be enough to make a decision to force necessary changes within the organization or to take other needed actions when one partner withholds their support. Partners may need to turn to their organizations’ bylaws, partnership agreements or operating agreements to determine whether and when they can force an uncooperative or non-performing partner to leave the company by buying them out.

It is often impossible for partners in a business to deal with a non-performing partner without taking the issue to court. Business law attorneys may be able to help business owners stuck in troubled partnerships preserve the health of their companies in the absence of written agreements or when some partners want to force a buyout.

Source: Houston Chronicle , “How to Deal With a Non-Performing Business Partner“, Terry Masters, December 12, 2014


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