What is a Partnership?
Partnerships are a necessary precondition for doing business in modern society. Our economy relies on free-market principles of interconnectivity and competition. Thriving in such an environment requires cooperation between multiple business partners.
In Florida, partnerships are an association between two or more persons to run a for-profit business. The most common advantages of partnerships are sharing setup costs, the ability to borrow more money, the flexibility of structure, and limited external regulation. There are downsides, too, including liability challenges and potential partnership disputes negatively affecting business. Florida law recognizes General Partnerships, Limited Partnerships (LP), Limited Liability Partnerships (LLP), and Limited Liability Limited Partnerships (LLLP). In General partnerships, each partner has an equal share and enjoys equal legal status. Limited partnerships have at least one general partner and one limited partner with different legal positions and liability. A limited liability partnership offers equal protection against liability for all partners, while LLLP is a combination of an LLP and LP.
How Do Partnership Disputes Arise?
Doing business involves ups and downs. Sometimes you experience downfalls due to market crises and customers’ changing preferences. In other situations, you and your partners develop diverging views regarding common business goals and overall strategy. Minor disagreements are part of everyday business, but conflicts over basic principles of your cooperation and the direction in which your business should proceed result in partnership disputes.
Continuing successful cooperation is impossible while business partners are quarreling about the essential aspects of their joint enterprise.
The two main ways to end partnership disputes are traditional litigation and mediation.
Resolving Partnership Disputes in Litigation
Litigating partnership disputes is a conventional way of resolving disputes among partners. Hiring an attorney and filing a lawsuit triggers a costly and time-consuming process that can put an end not only to your conflict but to your successful business cooperation as well.
Going to court involves unnecessary publicity affecting the business relationship and ruining the market reputation. Revealing sensitive business information means your competitors have insight into your business strategy and trade secrets. In addition, partners can wait months and even years to resolve their disputes. That inevitably leads to significant damage and lost business opportunities. Each stage of litigation (discovery, expert testimonies, witness examination, opening, and closing arguments) carries additional costs, not to mention attorney and court filing fees. Finally, litigation cannot bring reconciliation. Partners engage in a vindictive process aiming to defeat each other and win financial compensation, diminishing the prospects of their continued cooperation.
Mediating Partnership Disputes
Mediation is the most effective alternative dispute resolution method. As an out-of-court mechanism, it has numerous advantages over the conventional trial. Here are the most common:
1. Neutrality
The mediator is a retired judge or an attorney with knowledge of the business relationship. In addition to subject matter experience, mediators possess highly sophisticated negotiation and communication skills. Mediators are neutral, meaning they cannot represent any party, provide legal advice, or propose solutions. Unlike judges, mediators do not have decision-making authority. Their task is to facilitate negotiations allowing the parties to settle.
2. Confidentiality
Confidentiality is one of the most vital traits of mediation. The mediator must keep confidential all information shared during sessions. Likewise, the parties cannot share secret information with anyone, including the potential discovery procedure (if mediation ends unsuccessfully).
3. Time and cost-effectiveness
There are no hefty attorney and court filing fees in mediation. The process is flexible, without rigid rules typical for litigation. That means you can resolve the dispute in weeks or even days, returning to day-to-day business and successful cooperation.
4. Reconciliation
Unlike adversarial litigation, mediation does not wreak havoc among parties. The mediator seeks common ground between disputed parties, facilitating negotiations and reconciling their different points of view. The positive and neutral environment of mediation sessions stimulates parties to open up about sensitive issues. An open flow of information leads to better understanding and mutual trust. In such an atmosphere, partners are more likely to resolve disputes and continue thriving business relationships.
How Does Mediation Process Look?
Mediation has four stages: introduction, opening statements, and private and joint sessions. After presenting their credentials, mediators explain the procedure to disputed business partners. After that, each party can give opening statements outlining their arguments. The parties then go to separate rooms for a private session with the mediator (caucuses). Going back and forth between session rooms, the mediator evaluates each party’s arguments assessing the possibility of settling. In the joint session, the parties sit together for negotiations, bringing offers and counteroffers. The mediator facilitates negotiations, motivating the parties to resolve the dispute peacefully.
Choose Your Commercial Mediator Wisely
A certified Florida mediator with years of experience, Hal Wotitzky can identify the root cause of each partnership dispute, helping you and your partner overcome differences and continue thriving business cooperation.
Please call us today to schedule your appointment.