Business plans are documents which contain goals, guidelines, and instructions. A business must follow the plan in order to accomplish its main purpose. Such documents are generally created before a business is started. However, it is common for business plans to be reworked or re-implemented later on as the business encounters new challenges. Having a proper business plan in place is considered to be essential for the success of any business, especially newer small businesses.
An effective business plan should be clearly written and contain information that will help the organization operate smoothly and efficiently. A thorough business plan should include the following information:
- A clear statement of the business’ overall purpose and mission;
- Descriptions of specific business goals;
- Guidelines regarding business conduct and standards;
- The names, contact information, and background of potential members and other important parties;
- Instructions regarding financing, loans, and various other business expenses and financial matters;
- Provisions regarding how to resolve business conflicts, breaches of contracts, and other various legal disputes;
- Instructions regarding business succession, or the selling/transferring of a business and business dissolution; and
- Change of leadership procedures.
It would be ideal for the business plan to provide a clear map of where the business will be going, as well as how it will develop. This is especially important for the first few years of the business’ existence when it is considered to be its most vulnerable and risky.
What Are Some Common Examples of Business Plan Disputes?
Business plans are obviously necessary to help get a business up and running. However, they are often a source of disputes due to the fact that many parties may be involved in the planning practice. Some common examples of disputes involving business plans may include:
- Disputes Between the Business Operators and Local, County, Or State Entities: A common issue with many business plans is that they must adhere to the zoning, planning, and land use laws in the area. Zoning is how the local government controls how you can use your property, as well as what you are allowed to build on your property. The United States Supreme Court has ruled that this is constitutional. Generally speaking, a local government will provide separate districts for residential, business, and industrial uses. Failure to obtain approval from a government agency or a local business bureau could create an issue for the new business;
- Disputes Between Partners: Personal interests can create disputes over a business plan, especially in terms of the duties and liabilities of directors. The business partners may need to reach a compromise in order to ensure that the business runs smoothly;
- Disputes with Investors: One of the main goals of many business plans is to attract investors who will contribute capital to their business. These arrangements can often involve disputes over funding, such as a breach of contract; and
- Disputes Involving Shareholder Rights: Share and dividend disputes can occur even at the planning stage. An example of this would be how the distribution of stocks is often a point of contention between business owners and investors. Disputes involving stocks and dividends may be caused by many different issues, although the majority of corporate disputes are due to shareholders not understanding their rights. Another common cause is when corporate directors or officers neglect their duty to the corporation.
How Are Disputes Involving Business Plans Resolved?
It is clear that it is normal to experience a certain degree of disputing over the terms of a business plan. One of the main purposes of having a business plan is to “air out” any differences beforehand, so that those differences do not become a problem later on.
Alternatively, if a business plan dispute becomes prolonged or causes delays to the business operations, it may be necessary to hire a lawyer to help mediate the conflict. In some cases, a legal claim must be filed in court. This is especially true when the dispute is actually causing business losses for other people involved. The conflict may be subject to court intervention, such as prescribed mediation. Additionally, the court may order a damages award, if losses have already been experienced.
One alternative to court intervention would be alternative dispute resolution. Alternative dispute resolution, or “ADR,” refers to ways of addressing and settling disputes outside of court. The goal is to avoid the traditional, adversarial atmosphere of litigation. These alternative processes can be used to solve any type of dispute, especially those related to small businesses and business plans.
Alternative dispute resolutions are often so effective that the American Bar Association recommends them as a first step, as opposed to immediately going to a court to order a resolution. And, many courts actually require alternative dispute resolutions to be pursued before they will begin litigation. Settling disputes through ADR can save time and money, and the processes are generally less formal and more flexible than those in the trial court.
Another advantage to ADR is the cooperation and creativity of the parties involved. Because of the collaborative nature of ADR, each party may come to better understand the other’s position. Solutions that the court cannot legally impose may be implemented. Some different types of alternative dispute resolution include:
- Mini trial;
- Summary jury trial; and
What Else Should I Know About Business Plans and Their Related Disputes?
Business plans can be drawn up by the business owners, or by an attorney. There are many templates available online for those who wish to do it themselves. An effective business plan should include the aforementioned criteria as well as anything specific needed by each individual business.
Small business lawsuits most often result in a damages award as the primary form of legal remedy. This is intended to help reimburse the plaintiff for financial losses and costs. Other legal remedies may be more specific, such as the defendant being required to transfer a certain business asset to the plaintiff. Any remedy that is dispensed will depend on the specifics of each individual case, as well as differing state and local business laws.
For some small business conflicts, the available remedy may depend on the type of small business involved. An example of this would be how in a dispute over business ownership, the available remedy may depend on whether the business is a limited liability corporation (“LLC”) or a partnership.
Do I Need an Attorney for Issues Involving Business Plans?
A local business attorney can assist you in drafting a sound and enforceable business plan. Because state laws vary regarding the subject, an experienced and local business attorney would be best suited to understanding your state’s specific laws and how they may affect your legal options. Additionally, a well-written business plan which accounts for as many foreseeable issues as possible, can reduce the likelihood of future disputes.
Should you encounter any disputes related to business plans and planning, a business attorney can review the plans to determine how best to proceed. An attorney will be able to inform you of your legal rights and obligations, as well as your options in terms of alternative dispute resolution. Finally, an attorney can also represent you in court as needed, and provide you with either a strong legal defense or help you work towards an appropriate damages award.