What Happens When Business Partners Can't Agree?

By Bill Stilwell · Last reviewed October 16, 2026

The short answer

A deadlock procedure is a written plan for what happens when owners can’t agree on a decision. It usually works in steps: talk again after a cooling-off period, bring in a neutral helper like a mediator, and as a last step, let one owner buy the other out. Write it into your agreement while everyone still gets along.

What this means

A deadlock is a tie that won’t break. It happens most with two 50/50 owners, but it can happen with any group if a decision needs everyone to agree.

Common steps in a deadlock plan:

Cooling-off period. Owners wait a set number of days and meet again.
Outside opinion. Owners ask a trusted adviser, like their accountant, for a recommendation.
Mediation. A neutral person helps owners reach their own deal. The mediator doesn’t decide.
Arbitration. A neutral person hears both sides and makes a decision. Owners agree in advance whether it’s binding.
Buyout. One owner buys the other’s share using a set method. Some agreements use a “shotgun” or “buy-sell offer,” where one owner names a price and the other chooses to buy or sell at that price.
Closing the business. The last step if nothing else works.

Say two partners own a landscaping company 50/50. One wants to buy a second truck and hire a crew. The other wants to stay small. With no plan, the business sits stuck for months. With a plan, they wait 14 days, then meet with a mediator, and if that fails, the buyout terms kick in.

Why it matters

Ties freeze the business. Hiring, spending, and contracts stop.
Courts are slow and costly. Without a plan, the fight may end up in court, where state law decides what happens.
Default rules may not help. The Small Business Administration (SBA) warns that without an operating agreement, your state’s general default rules apply, and they weren’t written for your business.
Customers feel it. Owner fights show up in slow replies and missed jobs.

Who this applies to

Any business with two or more owners. It matters most with equal ownership or rules that need every owner to agree.

A single owner can skip this for now. Add it before bringing in a partner or investor.

How to do it

Decide what counts as a deadlock. For example, the same decision fails in two votes at least 14 days apart.
Limit which decisions can trigger the full process. A fight over paint color shouldn’t trigger a buyout.
Set a cooling-off period and a required meeting.
Name a type of tiebreaker: a trusted adviser, a mediator, or both.
Decide whether arbitration is part of the plan, and whether its decision is binding.
Set buyout terms as the last resort and connect them to your buy-sell rules (see 6.2.6 Buy-Sell Provisions).
Decide who pays for the mediator or arbitrator. Splitting it evenly is common.
Agree on how the business keeps running during a deadlock, like who handles daily work.
Have an attorney write it into your operating agreement or partnership agreement (see 8.7.2 Operating Agreement).
Read it together once a year so nobody is surprised.

What proof to keep

The signed agreement with the deadlock section
Written notice of any deadlock and the dates of each step
Mediation or arbitration agreements and results

Keep these in your legal records folder.

Common mistakes

Skipping this because you’re friends. Deadlocks happen to friends and family too.
Going straight to a buyout. Most fights can be solved with time and a neutral helper.
No rule for daily operations during a fight. The business still needs someone running it.
A buyout price with no method. “Fair value” without a way to find it leads to another fight.
Letting anything trigger the process. Keep it for real, important decisions.

When to get help from a pro

Attorney: to write the deadlock steps so they’re enforceable in your state. Ask:

Should we use mediation, arbitration, or both, and is arbitration right for us?
How should a buyout price be set if we hit a deadlock?

Mediator: when a deadlock actually happens.

Bill’s note

[Bill: add a short story or opinion here. For example, a 50/50 business you saw stall because the owners couldn’t agree, or why you set up SiteSmarty’s ownership the way you did.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: the deadlock steps in my agreement, or why this doesn’t apply yet]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: the deadlock section of the agreement]
[Result so far:]

Questions people ask

What do 50/50 partners do when they disagree? Follow the deadlock plan in their agreement. Without one, they may end up in court under state law.

What’s the difference between mediation and arbitration? A mediator helps you reach your own deal. An arbitrator decides for you.

What is a shotgun clause? One owner names a price. The other owner must either buy at that price or sell at that price. It pushes both sides to name a fair number.

Can we avoid deadlocks completely? You can lower the risk with uneven voting, a tiebreaker, or fewer decisions that need everyone. You can’t remove it fully, so plan for it.

Audit check

Question: Does the owners’ agreement include a written, step-by-step deadlock procedure?
Pass looks like: A clear trigger, a cooling-off period, a neutral helper, a defined buyout method, and a plan for daily operations during the dispute, all signed by every owner.
Fail looks like: No deadlock section. A buyout with no price method. A process any small disagreement can trigger.
Evidence to collect: The signed agreement and any records of past deadlocks.

Where this fits

Do this first: 6.2.1 Ownership Percentages and Capital Contributions, 6.2.3 Decision-Making Authority and Voting

Do this next: 6.2.6 Buy-Sell Provisions

Related pages: 8.7.2 Operating Agreement, 6.3.1 Business Attorney

Sources

U.S. Small Business Administration, "Basic information about operating agreements" (checked October 16, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.