Taking on a business partner is quite a bit like getting married. You pool your resources and work jointly for a specific goal, probably spending a lot of time together in the process. The business that you build up is a lot like the children you could share with a spouse. It is something that you both love, work hard for and have pride in.
Still, like any relationship, it is possible for a business partnership to falter and fail. Sometimes, business partners grow apart over time. It is also possible for there to be a breach of trust or a divergence of wishes between the partners that leads to problems in the relationship and then in the business. Maybe one of you falls ill or needs to move across the country.
Whether you want to end the partnership for personal or practical reasons, you need to be prepared to protect your interests in the business. You and your business partner should consider dissolving your partnership, which is a process quite like divorce.
Ideally, you already have plans in place to end your partnership
When you originally created your business plan or drafted partnership documents, you may have decided to include terms for ending the partnership. Including directions for terminating a partnership is a lot like executing a prenuptial agreement before getting married. Having a dissolution plan can make everything simpler.
These plans help set the terms for separating your interest in the business from that of your partners and potentially forming two separate businesses in the future. Whether you agree to a buyout or decide to split business holdings proportionate to the time and money each partner invested, there are a number of ways to set terms for the end of your business partnership that are fair for everyone.
Alternative dispute resolution could help
Couples that don’t want to litigate their divorce often decide to find a way to set their own terms for an uncontested divorce. If they don’t have a prenuptial agreement that helps with that process, they may instead choose to set terms outside of court.
Using an alternative dispute resolution like mediation or arbitration can help two or more people address outstanding issues and find compromises that work for everyone. Barring that, you may want to have your attorney sit down with your partner’s attorney to negotiate potential terms for ending your partnership.
Whether you want financial compensation for your investment or hope to retain ownership of the business, taking action to protect your wishes for the company during the dissolution of your partnership is important. Make certain that everything you agree on complies with your partnership agreement, as well as all applicable state and federal laws.