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  4.  » When business partners have a falling out

When business partners have a falling out

| Oct 19, 2020 | Commercial Litigation |

When you and your business partner started working together, you likely had similar goals and a shared plan for how to execute them. Now, you two may have different ideas about how you want to run your business. You may barely be able to speak with each other and your mutual antipathy could put your business at risk of imploding. By approaching your disagreements head-on, you can determine your business’ best path forward.

Evaluating your options

If you and your business partner can no longer work together, you must weigh your options for ending your partnership. This process will be easier if you two drafted an initial partnership agreement when forming your business. If you did, you can dissolve your partnership by following its terms. Yet, if one of you now finds your agreement objectionable, or if you never drafted one, you still have options for moving forward.

Often, in business breakups, one business partner will buy out the other. To proceed with a buyout, you and your business partner will need to conduct a business valuation. You will need to hire a third-party business valuator to complete this. There is no one way that valuators determine a business’ worth. Yet, the professional you work with may consider its assets, liabilities and income, as well as its projected future profits. Based on their findings, you can determine whether the cost of the buyout is worthwhile.

Neither you nor your business partner may have the funds available to complete a buyout. In this case, one of you may be open to reducing your stake in the business to allow the other to continue operating it. If this arrangement seems unpalatable, you two have the option to sell your business or dissolve it alongside your partnership instead.

Keeping calm

As you work to dissolve your partnership, you and your business partner’s tempers may rise. Staying calm may seem difficult. Yet, approaching your breakup with an even keel will keep negotiations from deteriorating. No matter your feelings toward your business partner, listening to their needs and goals will make them feel heard and understood. You must also make sure they hear and understand your needs and goals, too, since ambiguity could lead to further frustration.

Dissolving a business partnership is a complex process that you will not want to endure alone. By seeking legal help, you can make sure the terms of your business breakup are sound and valid.