Updated: Jul 26, 2021
When two people form a business together, they should know that a 50/50 partnership comes with some risk.
What happens to the company when they have a deadlock about an important business decision?
There are several options to address this concern.
If they can't resolve their disagreement through negotiation, they might nominate a neutral person, whom they both trust, to intervene. If no one comes to mind, a referral to a third party mediator will help them work out a settlement.
And if that doesn't work, one of them can buy out the other or, if neither of them wants to do that, the dispute can be decided by litigation or arbitration.
It's best to decide the dispute resolution framework up front in the operating agreement.
If you're considering starting a partnership with an old friend, think back to a time when you said “wow, I did not see this coming.” A good agreement can help avoid unpleasant surprises later.