Just as your relationship with your business partners can seem like a professional marriage, the end of a business partnership can be something like a divorce. Some partnerships end with every jointly owned item prompting a near fight to the death, which resembles mutual destruction instead of a professional break. Other partnerships reflect mutual respect born from working closely with another person, and the partners leave wishing the best for one another. As an article by the Business Transition Academy points out, business dissolution provides an opportunity to resolve an important working relationship in a way that sets each of you up for future success.
When a Partnership Runs Its Course
Business partnerships end for myriad reasons. Perhaps you no longer agree on the direction your company should take. Maybe circumstances changed for one partner such as: wanting to invest their time in an entirely different business, planning to relocate, or quitting working altogether. An economic downturn can mean the business no longer supports both partners as well. Whatever the case, as soon as you recognize the partnership needs to end, begin preparing yourself to act and broach the topic with your partner. Pull out the original business planning and setup documents, any operating or buy/sell agreements, and review your options with a partnership dispute attorney.
A Word of Warning
Some situation may find you planning to end your partnership due to allegations of breach of contract. You may also suspect your partner will be moving aggressively against you. If this is the case, immediately consult with a partnership dispute attorney. This ensures you have a reliable guide through the process and can readily respond to any resulting business litigation.
Facilitate Open Communication
You’ve poured your energy, commitment, and maybe even part of your soul into your partnership, so it’s not surprising that discussions about making such a major change can get a little heated. As much as possible, remain objective and focus on your end goal, a successful transition, instead of dwelling on past issues and grievances. If communication presents a problem, consider hiring a professional mediator to provide an objective voice in discussions. There are many decisions to be made at the end of a partnership, such as
- Finding an outside firm to assess the company’s value, unless that’s already known by all partners.
- Mapping out multiple options for how partners may transition out of the business without causing undue disruption. Ranking each scenario can help establish the wishes of the partners and clarify the best choice for the business.
- Succession planning to handle the transition after a partner leaves, which should involve other employees and not just the remaining partner or partners.
Even if the business has an established corporate attorney, each partner will likely benefit from hiring an individual legal representative to ensure they negotiate the best terms for themselves.
Setting the Right Tone
In the early stages of discussions, keeping this confidential will allow your business to continue to operate smoothly while decisions are being made. Without detailed plans, it will be difficult to address employee and customer or client questions and concerns. This can create a lot of stress and loss of business, which benefits nobody in the long run. Even if negotiations are tense, remember that partners past and present set an example for employees, so keep your public exchanges as professional and upbeat as possible. Once the partnership is dissolved, you will want to carry on much the same way. How you talk about your former partners will reflect on you, so even if your legal obligations end, you will want to conduct yourselves as if you remain partners. Don’t break confidences, don’t undermine new ventures. Instead, remain business associates and try to be as supportive as possible.
If you are facing the dissolution of your partnership, you should contact an experienced business attorney as soon as possible to discuss your options. It will be easier to leave on good terms when you know that your interests have been well represented throughout the process.