What Clause Do You Use to Address Deadlock Disputes in a 50/50 Partnership?
Are you entering a 50/50 partnership? No matter how much trust you have in your business partner, it is crucial that you have a well-drafted partnership agreement in place. Notably, with 50/50 partnerships, a provision that addresses deadlock disputes is a must. Here, our West Palm Beach partnership dispute lawyer highlights the key options to consider when drafting a 50/50 partnership agreement to deal with deadlock disputes.
What is a Deadlock Dispute (50/50 Partnership)?
In a 50/50 partnership, a deadlock dispute occurs when the two equal partners cannot agree on key decisions affecting the business. In other words, it is a fundamental impasse. The challenge is that because neither partner has a majority stake. Therefore, a “majority rules” solution is effectively not an option. Deadlock disputes can hinder the operation, growth, and future of the business.
How to Address Deadlock Dispute Risks Using Your Partnership Agreement
To address the risks of deadlock disputes in a 50/50 partnership, a partnership agreement should include a specific mechanism(s) for conflict resolution. One effective method is the inclusion of a tie-breaking clause. With a tie-breaking clause , an external advisor or third party casts a deciding vote on contentious issues. Alternatively, you can establish a rotating vote system where partners alternate having the final say on important decisions. Though, some people do not like that type of plan.
Notably, many partnership agreements also contain provisions that require mediation or arbitration before any litigation can proceed. Finally, business partners may want to consider a buy-sell agreement that outlines procedures for one partner to buy out the other when a dispute cannot be resolved.
The Bottom Line: Deadlock disputes are a serious, inherent risk for any 50/50 partnership. Getting stuck in this type of dispute can seriously hurt an otherwise successful business. Given the challenge, a comprehensive deadlock dispute resolution provision is a must.
Already in a Deadlock Partnership Dispute? Seek Professional Legal Counsel
If you are a member of a 50/50 business partnership in Florida, a proactive approach to dispute resolution is a must. Already involved in a deadlock dispute? You need to take action to protect your personal and professional interests. First and foremost, you should refer to your existing partnership agreement to understand the deadlock dispute resolution process that is in place—or the lack of one. From there, you should develop a comprehensive strategy to solve the dispute. A top-tier Florida partnership law attorney for deadlock disputes can help.
Speak to Our South Florida Partnership Dispute Attorney Today
At Pike & Lustig, LLP, our Florida partnership dispute lawyer is committed to providing solutions-focused advocacy to clients. If you have any specific questions about deadlock disputes and 50/50 partnerships, we are here as a resource. Contact us today to arrange your strictly confidential, no commitment initial consultation. Our firm has an office in West Palm Beach and we handle deadlock business partnership dispute issues throughout South Florida.
