Divorcing your business partner

Tips for successfully dissolving a business partnership – and protecting your investment.

By Mark M. Billion

Just like marriages, business partnerships can end for a variety of reasons. Although some business partnerships come to a close on amicable terms, there are a number of situations where severing a business relationship can lead to an unhappy split between business partners – which can not only be incredibly destructive for both the partners themselves, but can have a negative impact on all employees. During a bad “breakup,” routine decisions become tests of will, and the strife is felt by all employees – often encouraging them to start making other career plans. Business divorces have, unfortunately, ruined many companies. However, if handled properly, and quickly, they don’t have to mean the end, but can be a step towards a new beginning for you. 

As with many key business law issues, the key to successfully navigating the challenges of dissolving a business partnership is timing – so it’s critical to find an attorney who handles business divorce right away. The longer it drags on without direction, the worse it is for all involved. And as a word to the wise, this attorney that you find probably should not be the company’s regular attorney. 

Before meeting your new attorney, give serious thought to where you want to be in a year. Do you want to be running this business without your partner(s)? Do you want to start another business doing something similar? Work for someone else? It’s different for everyone. But if you tell your attorney what you want, they can work backwards to formulate a plan. 

Now, hopefully you’re not in the midst of anything like this and with some planning, you can eliminate much of the damage and uncertainty beforehand. The goal is to figure out what you need to protect, and to update these protective measures as the company evolves. 

Figuring out what to protect can be a complex question, but you can start by imagining that you are leaving the company. What are you worried about? Most likely, it’s about keeping your investment in the company safe. Many people also worry about what they would do next. Some worry about using what they learned elsewhere. It all depends. But I encourage you to consider it.

Then imagine your partner(s) leaving. Are you worried about your customers or employees going with them? What about buyouts? Or supplier relationships? Again, different businesses have different concerns. But the point is to think about what would worry you. 

Knowing that, an experienced attorney can craft trade restraints, options, buyouts and other documents that will help protect you and the business should things sour between the partners. We often couple this process with discussions about how the company is supposed to run on a day-to-day basis, so that everyone understands how decisions are made. This goes a long way toward keeping everyone satisfied with the business arrangement. And we repeat this process as the business grows. 

Although nobody plans to dissolve their business partnership when first starting out in a business venture or company together, there are many cases where severing a business partnership is the right move for all involved. If you do find yourself thinking about ending your business partnership, it’s critical to seek legal counsel from an attorney, experienced in this complex area who can help you navigate through the specific stages of a business divorce – and can help you not only successfully, and seamlessly, end your partnership but set you on the right path as you move forward in your future business ventures.

Mark M. Billion is an attorney in the Lowcountry. A transplant from Wilmington, Delaware, he graduated from Columbia University Law School with its highest academic honors and has been representing entrepreneurs in litigation and in transactions carrying substantial risks of insolvency or litigation for the better part of two decades.
www.billionlawgroup.com

Editor’s note: This article isn’t legal advice and does not form any attorney-client relationship with LOCAL Biz or Billion Law.

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