Divorcing Your Business Partner

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Biz teamYears ago you launched a company with a trusted partner. Together you built the firm into a success. But now you find you and your business partner no longer agree on the direction the company should take. Increasingly, you are finding the need to break free from your partner. Like a marriage, dissolving business partnerships can be tricky and painful.

“Most business partnerships are formed because partners do not believe that they can be successful alone, but with combined efforts they believe that they can succeed beyond measure. Other individuals fear taking on all of the risks involved in starting a new business venture. For others it is an easy way to gain credibility instantly by leveraging the experience of both partners. All can be enjoyable and financially rewarding. However well intentioned a business partnership may begin, many partnerships end up dissolving,” notes small business expert LaVon Lewis, who started his firm Pencilworx Design Group with two partners.

“It is truly like a marriage. You do not always agree on every detail but you have to realize the strengths and weaknesses of each partner and leverage those everyday. My partnership is a success because it is built on continuous trust, respect, and belief in common goals,” he says. “In today?s business world partners deal with money, intellectual property in addition to spending about 60% of their day together.”

So when do you work it out or spilt up? “When the trust factor goes out of the window then it is probably time to split the business,” offers Lewis. But be prepared for a battle.

“Dissolving a partnership can be very complicated. After all, can you split intellectual property? Is there an impartial indicator that can measure the effort of individual parties in the partnership? Because the reality is that there are advantages and disadvantages to a split. And if the split is not handled correctly, then it could leave certain partners feeling robbed of their gifts, talents and time,” advises Lewis.

The ease of the split will also depend on just who owns what. “You have to know how ownership of the business is divided. Most partnerships are established with the assumption of a 50/50 split. Unfortunately this is never the case. A dominant member is the most common case,” says Lewis. “Oftentimes one member feels as though everything is fine, while another could feel overworked and under-appreciated. These elements of the partnership can make coming to an agreement very difficult.”

Don?t give up, especially if the future of your company is at stake. There is a way to split from your partner, leaving both parties happy. “Fortunately, this situation isn’t entirely out of reach,” offers Lewis. “You do have a discontinuation process that you can go through. If the decision is mutual, you and your partner can negotiate and decide who is going to take what. If the feeling is not mutual, then you could do one or two things. Either oblige to the agreement that was initially put together by a lawyer prior to starting the business or settle it in court to agree on a split percentage. Sometimes this process ends up working well for one party or both. Most often there is still dissatisfaction as there is no way to request certain assets once your business is in the hands of the court system.”
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However, if you think you and your partner can weather the rough times, look for ways to come up with a peaceful solution to your disagreements. “Ultimately I would not recommend a split in most cases because of the competitive advantage that a partnership creates. Oftentimes, splits come though a lack of maturity, trust or simply a misunderstanding,” says Lewis. “Regular meetings with frank dialogue will prevent the snowball of bad feelings and hidden emotions that lead to split partnerships. So at the end of the day I understand if you have to split, but you should grow together through the good and the bad and remember the final goal at hand and that is to win.”