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The end of a business partnership is often an emotionally draining experience for everyone involved. Successful partnerships start from a foundation of trust, shared goals and, in many cases, friendship. When two partners decide to go their separate ways, it can be tricky to manage the thorny financial and practical matters of dissolving a business partnership while preserving good relations.
When a business partner informs you of their desire to stop working together, it’s natural to feel disbelief, frustration or resentment. These negative emotions might be heightened if your partner informs you that they’ve already retained legal counsel; in my experience, this can be a sign that your working relationship is beyond repair and needs to be ended as soon as possible.
Considering Your Next Move
It’s never good to make big decisions impulsively, so first, take the time you need to calm down and start thinking clearly. Once the initial wave of shock has passed and you’re on firmer emotional ground, reflect on where you are professionally and whether this might be a good opportunity to shift your career trajectory. Now that you’ve been put in a position where major change is inevitable, it’s an ideal time to decide whether you’d be happier pursuing different career goals.
If you’re happy where you are and want to keep going as a solo entrepreneur, that’s great, too—though it could take some negotiating with your soon-to-be former partner, who may want the same thing. Whichever path you decide on, you may realize you have a need for outside investors or the stability that merging with another business can bring.
Options For Exiting A Business
No matter the type of business, when a partnership needs to be unwound, there are really only three paths forward:
- One partner buys out the other,
- The business is split into two new enterprises, or
- A third party purchases the company.
It’s a more pleasant experience for everyone involved, not to mention being far less costly, if the two parting business associates can agree on a path forward and work together harmoniously. If legal representation becomes unavoidable, the process may take much longer and end up being more of a financial drain than it would be otherwise.
Putting Your Team Together
A business partnership is best unwound with the help of a team of qualified experts. The complexity of the issues at play means that no one person is going to understand the full picture all by themselves. But by surrounding yourself with trusted advisors representing different specialties, you’ll cover any gaps in knowledge and ensure that every important decision is considered from multiple angles.
Your team should include:
- A banker who can suggest creative funding and recapitalization strategies, and who can potentially assist with a loan if it becomes necessary.
- A wealth advisor who can put your options in context and explain how they would affect your personal financial security. This person might also be able to suggest strategies for using your own resources to temporarily bridge any cash-flow problems, which could save you money in the long term.
- An attorney who can analyze any legal documents and safeguard your interests. If the other party’s tone remains genial, this person may be able to work behind the scenes throughout the entire process.
The Negotiation Process
After assembling your advisory team but before engaging with the other party, you’ll want to closely review your original partnership agreement and other important documents. You and your partner might have already established dispute resolution processes, valuation formulas or buy-sell clauses that will be important for clarifying your legal rights and obligations and determining how you proceed.
Throughout the negotiation process, strive for a congenial relationship with the other party, if for no other reason than because it’s the most efficient path to the end of this journey. If the other party is acting aggressively, resist the temptation to do the same, even if it results in short-term discomfort. Having a seasoned attorney on your team can be a huge benefit, as this person can often de-escalate tense situations in a respectful but persuasive way. Even if the beginning of a separation is somewhat rocky, taking an empathetic, balanced approach can turn things around and result in an amicable outcome.
An Opportunity For Improvement
A business separation is never easy or comfortable, but if one partner has made up their mind to leave, a change of some kind is inevitable. Instead of viewing this series of events as a setback to your original aspirations, embrace this opportunity to improve upon what existed before. With the help of a skilled advisory team and a collaborative mindset, you and your former partner can both emerge in strong positions to succeed in your respective endeavors.