United States: Is It Time To Leave Your Business Partner Behind? (Video)

Last Updated: July 22 2019
Article by William J. Piercy

Owning a business can be hard.

But, running a business with a partner who no longer shares your goals, values, or work ethic is a recipe for failure.

If you find yourself reading from that recipe card, then "It May Be Time to Leave Your Business Partner Behind."

Today, I will share with you some tips to help you extricate yourself from an unproductive business relationship, so that you can move on to better ones.

- Step One: Get Professional Help

Breaking with a business partner can be stressful. Don't go it alone. An experienced attorney, accountant and business advisor can relieve much of the anxiety associated with a business divorce and can help you make informed, level headed decisions.

- Step Two: Determine Rights and Obligations

You and your business partner have rights against and obligations to each other AND to the businesses you own together.

Whether you have a formal shareholder's agreements or your deal is on the back of a napkin, figure out --- at a high level --- who is obligated to whom and for what.

- Step Three: Ensure Access the Information and Infrastructure of the Business.

Too often, one partner will attempt to freeze out the others by refusing access to company financials, changing the locks to the office or the passwords to the computer network. Protect yourself by getting to know the vendors who provide access to your company and its information. These folks may include the landlord, the IT guy, and the banker. If these people know who you are, it is typically easier to restore your access to the business if you are cutoff by a recalcitrant business partner.

- Step Four: Decide Where You Want to Go Next

Figure out what you want to do next.

Do you want the business?

Would you rather sell out?

Do you want to remain in the same industry?

With a goal in mind, you can chart a course to get there and focus on the future – NOT the past.

- Step Five: Chart Your Course

Make a list of your obstacles to and opportunities for a clean exit:

- Are there loans, leases or other long-term obligations to factor into an exit plan?

- Are you bound by a non-compete?

- Are there potential buyers for the business?

Use this information to formulate a strategy to get your business partner out of your life.

- Step Six: Along the way - Do NOT Help Yourself to Company Property or Data It can be tempting --- particularly when a partner is being difficult --- to help yourself to an extra distribution; forward the company's customer list to your personal email account; or take other seemingly innocuous actions.

Resist the urge! While you might own a piece of the company, company property belongs to the company. Not to you!

- Step Seven: Tell Your Business Partner You Want Out

Whether you schedule a meeting over coffee or send an email, explain in clear, respectful terms that the business relationship no longer works for you and that you want out. Offer to cooperate in a smooth transition. Waiting for a response before sharing your transition plan - You might be surprised!

- Step Eight: Negotiate from a Position of Strength

Consider what your business partner would want if he or she performed the same analysis as I just described. This is not altruism. It is sound negotiation. The more you understand about your partners', goals, interests, limitations and opportunities, the more negotiating power you will have.

Agreeing on an amicable separation plan is best --- but not always possible. If your partner is unwilling to negotiate in good faith, then stop trying. You have options:

You can walk away. While this may result in significant sacrifice, it can also be liberating.

You can stay. Remaining in the partnership, even a dysfunctional one, may be an option, particularly if end is in sight. Perhaps there is a buyer or retirement on the horizon. Just don't stay too long. Life's too short for a bad business partner.

You can fight. If negotiations fail, litigation may be necessary. Through a lawsuit, you may be able to recover damages for malfeasance, resolve disputes about ownership and compensation and perhaps even dissolve the business and divide its assets.

Move on and move up.


For more information, see my blog at www.bfvlaw.com.

I've also written a book on this subject, "Life's to Short for a Bad Business Partner." As always, please let me know if I can help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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