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How to avoid business disputes

For those who’ve dreamed of opening their own business for years, when they finally start down the path to running their own shop, they realize how many details are involved before a business’ doors open. An entrepreneur needs to choose a business location, formally register the business, hire employees and launch a marketing campaign.

Entrepreneurs also need to think about any potential pitfalls down the road for their business. One of those is becoming involved in a business dispute, which can hamper a business’ success.

What causes business disputes?

Business disputes generally emerge from the following areas:

  • Partnership or shareholder disputes
  • Employee contract disputes
  • Purchase agreements or sales agreements disputes

To avoid potential business disputes, business owners must have solid agreements and contracts in each of these important areas.

Partnership agreements

Many small business owners aren’t running a corporation with shareholders, so they don’t need to worry about the buy and sell agreements that dictate how to buy out business shareholders. However, many small business owners do have a partner (or two or more) involved in the business.

While it is legal to have an oral partnership agreement, it’s not the best idea if you want to avoid future problems. Partnership agreements lay out each partner’s financial investment in the business, as well as how to split business profits or losses. They also should lay out how partners will make major business decisions and what role each partner will play in the business. Finally, partnership agreements should include what will happen if one partner decides to sell his or her share of the business or if the partnership needs to be terminated.

Employee contracts

Before finalizing any employee hiring, small business owners should have an attorney review their employment contracts. An attorney ensure you have the basics included in the contract—the employees’ salary or wages, their benefits, their schedule and their job duties—and an attorney can ensure that the contract includes how the business will handle employee grievances.

That language will certainly help if you need to terminate an employee or if you face a harassment claim. An attorney also can review your business’ employee handbook, to ensure it is clear and covers all the legal information needed.

Purchase agreements, work contracts or sales agreements

No matter what business you are in, you more than likely will need some sales agreements, work contracts or purchase agreements (or all three). Sales and purchase agreements detail the sale and purchase of goods or services, when these goods or services will be delivered and what will happen if either party breaches these agreements. For businesses offering a product with a warranty, this information is part a sales agreement with a customer.

Work contracts are like purchase orders or agreements—specifically detailing what work a contractor will supply and by what date. They also should have a clause explaining what will happen if a contractor doesn’t provide the work on time or in the quality expected.

With a little forethought in all these areas—partnership agreements, employee contracts and buying and purchasing agreements—you can protect your business against future disputes. As a result, you’ll have more time to work on growing the business and seeing all your hard work pay off in your business’ success.

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