How to resolve conflicts on a 50/50 startup?

If you are a 50/50 partnership then you have the usual options to manage conflicts that cannot be resolved:

1. Buyout your partner;
2. Terminate the partnership;
3. Dispute resolution (anything the two of you agree to should be fine, provided it does not run afoul of your jurisdiction's laws for your entity type but I would like to recommend mediate and alternative dispute resolution with an established organization).

Having said that, you can preempt many conflicts by preparing your founder's agreement to manage expectations, responsibilities and code of conduct.

Consider including specifics about who is to make decisions about what as the company grows and on what basis that authority should be subject to veto by the other partner (such as a good faith belief that the action to be taken will substantially degrade of the value of any asset - including good will, reputation, etc.). Include information and/or documentation about how and when debt/equity/revenue will be spent, such as how much will be retained as reserves, etc. Include a dispute resolution process for the two of you prior to seeking outside assistance and require the usual good faith obligations to try to resolve the issue.

Set out a meeting schedule to discuss milestone and growth strategy and stick to them.

Much of the success of a 50/50 partnership stems from the skills and intentions of the partners not just at the beginning of a venture but as the company grows.

Good luck!

If you're bringing very different skills to the business, then you can handle conflict by agreeing that while discussions are held, ultimately the partner with the appropriate expertise gets the final say.

Another option is to take turns who gets the final say after discussion. Set a limit on time to discuss (obviously depends on the nature of the issue) and at the end, if you can't reach an agreement, take turns who gets to decide. You decide Issue #1, partner decides Issue #2, etc.

I was in similar situation and I was advised to include a Shotgun Clause in our shareholder agreement. It is apparently the best way to solve any dispute between 50/50 shareholders but I have never experienced it.

Be very aware of a 50/50 partnership because it will leave you conflicted and unhappy unless you have 100% the same mindset as your partner.

I'm in the process of exiting from this exact situation because there will always be a major decision that you won't see eye to eye on and one of you will have to settle for the good of keeping the business alive. This will build up anger and angry is not how you should operate a business.

I agree with having a board of directors or a having a third party "counsel" (someone close, smart and non bias) that you can have to break up the argument in a deadlocked situation.

I am also a part of startup where it's a 50-50 ratio with my Co-founder. I take care of selling and he takes care of building. When there is any feature to be built - how it should be built, whether it would affect the roadmap, time taken, etc. - he gives me an estimate and I take the call whether it's worth building and if it would impact a lot many people.

Even though we discuss on every aspect, we have a clearly drawn line on who makes the final call.

I'm going through a breakup right now with my partner, where he and I started the company as 50/50 owners and then later brought on a third party which was then split 38/38/24 between us. This was a mistake for many reasons, which I won't get into within the scope of this forum. Ultimately, I (and a friend that was helping me for free) ended up doing 98% of the work over a year and a half period and now my partners stand to benefit from our tireless efforts.

When my partner and I first conceptualized the idea, some five years ago, we naively had no founder agreement, no vesting agreement, no milestones, and no reason to think that we would ever be enemies. Flash forward to present day and we're faced with going through mediation (or worse) to decide what is the most equitable way to split up the assets (that I created) and move on.

If I took anything from this lesson it's that you ALWAYS need to plan for the worst case scenario. No matter how peachy things are in the beginning, when creative juices are flowing and you're wrapped up in the excitement of the moment, the unfortunate reality is that at some point you're going to butt heads. In my case, our vision of what the end product should represent somehow went astray; once you reach that realization there's no going back. At that point you've surpassed a simple lover's quarrel and reached a very definitive fork in the road. In our case, neither one of us was willing to compromise our vision so we each decided to take our own path. As relieved as I am to be free from the burden of carrying them on my back, I'm now faced with potentially losing a year's worth of work.

Take home: if, and only IF, you feel the need to maintain equal ownership then you absolutely need a safeguard in place. A third party (or better yet, a Board) is always a good idea, provided they see your vision and can offer value during a conflict. In my case, our third party was a financially vested partner who is a contract attorney and, the real kicker, was also childhood friends with my founding partner. Let me state the obvious here: bad idea. Do yourself a favor and learn from my idiocy — I know I have.

To expand on my last comment (read: rant) with something perhaps a bit more constructive, other's had mentioned the concept of alternating voting rights; I think this is questionable, since it's not much different than flipping a coin, but has potential if expanded upon.

It might be more beneficial to use a format like uservoice.com has in place, whereas each person gets a certain amount of votes per month, quarter, sprint, or however you want to divy it up. When you reach a disagreement, each person is allowed to use as many votes as you want, depending on how adamant you are on your stance. This forces you to really consider how important that feature or idea really is, knowing that if you go "all in" on the first dispute that comes up you may be screwing yourself down the road.

Still, with two people, it's not going to be a flawless system. Either person could easily manipulate the situation so that they hold off on bringing up any potential debates until a time when they know they have more votes than you. This potentiality could be lessened if you put a cap on the amount of votes you're allowed to use: say, three per incident. However, you then run the risk of a stalemate if you both have at least three votes remaining.

Clearly it's not an ideal solution, but one of many that have been presented as an option to keep the peace. Ultimately, just try to respect one another and each other's opinions, no matter what your stance.

When you set up the company, you should establish procedures to "conflict resolution". This goes in the Mem/Arts documents for UK company formation.

Ultimately, a 50:50 split is a convenience, and one partner is always senior, in which case it makes sense that they have the final say in any situations where the partners disagree.