6 Things to Do When Your Business Partnership Breaks Up
A business partnership can end for a variety of reasons. Sometimes one partner needs a career change for personal reasons. Or the business can no longer financially support both partners. In other cases, the partners do not see eye to eye and are splitting because of differences of opinion or disagreements. Whatever the reason for the split, it is important that you protect yourself and your assets during the dissolution of a partnership.
Here are six things to do when your partnership is breaking up:
1. Involve Professionals in the Process
Unless your dissolution is very friendly and simple, you should most likely contact a lawyer and tax professional to assist with the process. Hiring a professional mediator is another option that many people use especially in contentious situations to reduce legal fees. Get recommendations from other business owners in your area for any professionals that you need. If many of the issues are related to the specifics of your business, consider hiring lawyers or mediators who specialize in your industry.
2. Have a Formal Meeting
One of the first steps you should do is have a formal meeting to officially dissolve the partnership where minutes are recorded and a third party is present. Topics to discuss include financial responsibility, distribution of capital and products, the timeline for dissolution and each partner’s plans regarding the continuation of their portion of the business.
“In this meeting, the partners should discuss how to pay off creditors of the partnership (if any). If any assets remain after the creditor pay off, such asset distribution would go to the partners with both partners agreeing on the dissolution,” says attorney Senen Garcia, senior partner with SG Law Group in Coconut Grove, Florida. He also says that once the debts are paid off, the partnership should be formally dissolved with the state, depending on the structure of the partnership.
3. Tie up Loose Ends as Quickly as Possible
Typically, the quicker you can move through the dissolution process, the better for both the business and the partners. “The most important thing is to end the partnership quickly so that the new energy can be harnessed by each partner,” says Paul Foster, The Business Therapist. “Have you ever seen the change in a person from the day before the divorce is signed to the day after? Same thing for business partnerships.”
4. Keep the Lines of Communication Open
If your dissolution is because of a disagreement, then the last thing you probably want to do is speak with your partner. But the best way to ensure that your business will prosper in the future and minimize the cost both in time and money is to communicate with each other. “Most partners tend to go to their respective ‘corners’ and keep communication to a minimum,” says Garcia. “However, the most important element that should be kept on going is communication.”
5. Evaluate Your Staffing Needs
One of most valuable parts of having a business partner is that both people typically bring complementary skills and experience to the table. Foster points out that when a person leaves a partnership, there is often a hole in the fabric that will impact the daily running and future progress of the company if not addressed. “Each partner should take inventory of their new ‘skills gap’ and look to hire a new employee to replace the skills of the former partner,” Foster says.
6. Bite Your Tongue
In many ways, dissolving a partnership is similar to a divorce and there are often disagreements and frustrations in the process. For the future of your individual companies, your professional integrity and your own stress level, be as polite and professional as possible in dealing with your former partner. “Take the high road every time,” says Foster.
Jennifer Goforth Gregory is a journalist with over 17 years professional writing experience.