January 10, 2023

When Co-Owners Can’t Co-Exist

Among the most frequent — and sensitive — disputes in business are those between co-founders or co-owners of a company. These conflicts come in all shapes and sizes, but some types are most prevalent. Because they can be so contentious and emotionally charged, it’s best to handle them carefully and quickly before they fester and cause irreversible damage. Here are the ones we’ve seen the most, along with a few paths parties can take to resolve disputes and prevent worst-case scenarios.

     Different Perceptions, Divergent Goals

Credit and recognition can be key drivers of conflict: When junior owners of an organization feel like their recent contributions aren’t being recognized or, conversely, when senior owners feel they’re not being given their due for past efforts that grew the business into what it is today. In other conflict scenarios, a senior owner wants to keep the business on its traditional course while a junior owner is anxious to expand into new areas. Also common are situations when a senior owner is moving toward retirement, but can’t let go of his or her baby and hand over responsibility to junior owners. 

Attorneys are a great resource for co-founders and co-owners for help in these situations, but there are other options business owners can turn to in addition. Mediators work with conflicting parties to lay out different means of resolving disputes while evaluating the advantages and disadvantages of each. Business coaches can suggest new methods for the owners to execute their roles, or facilitate difficult discussions around the issues at hand and identify ones that haven’t yet been addressed. Similarly, an external business consultant might be able to help balance divergent goals, discover unseen opportunities or chart a new course for a business that everyone can align on. 

     Expenses: Business or Personal?

Small business owners often blur the line between business and personal expenses — dining out, gym memberships, travel, etc. — and this can cause conflict when two or more partners are involved. It quickly becomes a problem when co-owners or co-founders have different ideas about what is or isn’t an appropriate use of the company credit card, or if one partner feels another is abusing it or simply deriving more benefit than him or herself. 

In these cases, an accountant may be able to help explain what is considered appropriate use of corporate funds, determine how co-owners use them when the expense is questionable and install mechanisms to be sure no one is taking advantage. 

     Unequal Effort

One of the most common causes of dispute: when one founder or owner, rightly or wrongly, feels like another founder or owner isn’t doing his or her fair share of the work. 

When one partner believes they are doing more work than the other, recognize that things shift over time and while you may be carrying more of the load today, the situation may be reversed in a few months. Time is a great leveler. 

     Substance Use 

A leading cause of someone not pulling their weight, this becomes a serious concern when a co-founder or co-owner is unable to productively participate in the operation of the business due to their substance use. 

When this is the problem, it may be most effective to first consult a doctor or other medical professional, while also considering mediation or a business coach. 

Overall, if you are a co-owner or co-founder involved in a dispute with your partner(s), the key is to talk to them, listen and try not to judge. In many cases like those described above, the issues are not new: they’ve been present in the business for a while, the co-owners or co-founders have discussed them repeatedly and feel like they’ve had the same conversation over and over again without getting anywhere. 

That’s frustrating, and frustration leads to resentment and, many times, anger and rash decision making. Early intervention is key to try and resolve the issues before too much resentment builds. And wherever you are in the process, sometimes taking a step back and thinking about what is really motivating the other party, or why they believe what they believe, can provide fresh insight and help break a deadlock.