Partnership breakup can be quite similar to a divorce in that emotions may flare despite a need to address numerous practical matters. Professionals who have committed to running a business with another person may eventually come to regret that decision if a partner breaches their duty to the organization, fails to follow through on their promises or proves less competent than they claimed to be.
Other times, both partners might perform their jobs appropriately, but one might want to grow the business, while the other might hope to sell to an outside party and retire early. When there are disputes between business partners, a buyout or partnership breakup may be necessary. In that situation, the partner proposing the end of the working relationship may need to evaluate both litigation and mediation as solutions for the issue at hand.
When is mediation appropriate?
Mediation is a form of alternative dispute resolution where parties embroiled in a dispute work with a mediator to settle their disagreements. It is a cooperative process that focuses on compromise. Mediation might be a viable option in scenarios where an ongoing working or social relationship may persist after the end of the partnership.
The cooperative approach required in mediation can reduce the damage to the relationship between the two parties, even in a deadlock scenario. Mediation is also helpful in cases where business partners may not want to make the details of their dispute public. It is a confidential process where partners can discuss misconduct or personal issues without revealing those matters in open court.
Finally, mediation is helpful in scenarios where businesses or disputes are so complex that outside parties may struggle to comprehend them. The partners do not have to rely on others to make sense of the situation, as they retain control over the outcome.
When is litigation the better option?
Litigation may be necessary in cases involving embezzlement and other forms of financial misconduct. The discovery process during litigation allows for access to both business and personal records that can influence the outcome of the case.
In scenarios involving an enforceable contract that one partner does not want to uphold, a judge can review the contract to determine its validity and resolve the disagreement. Litigation may be the best option if there is concern about a partner causing future damage to the organization.
Reviewing what triggered the desire to end one’s business partnership with a skilled legal team can help professionals determine whether mediation or litigation might be a better option given their circumstances. Successful mediation can prevent litigation, but litigation is typically still an option even if mediation fails.