What’s Most Important When a Business Partnership Ends?
It’s no surprise that one of the last things business partners think of to discuss when forming a new partnership is how to dissolve things if and when the time comes that it’s best for the business or themselves to do so. However, this is a crucial oversight because no matter what our best-laid plans are – life continues to throw surprises at us. Thus, one of the smartest things to discuss up front, when things are amicable and there is no tension, is how to handle things if and when they turn sour as positive relationships are necessary for a successful business.
So, it’s fair to ask: what is important to discuss when a partnership breaks up? What are the risks? Where can you protect yourself, your business, and your partner? Ultimately, it boils down to the large financial stakes all partners have as well as the ability of the business involved to remain viable and profitable after such a separation.
Some of the key things to consider when a business partnership may dissolve
There are a few key areas you’ll want to go over before things become heated to ensure that everyone is on the same page. When you have an agreed to plan before things become emotional, it makes it much easier to maintain working relationships – even when personal relationships have become strained. So, keep these areas in mind as you plan for a potential split in your business partnership:
What Does Your Partnership Agreement Say?
If you don’t have a partnership agreement, discuss this with your personal business attorney. They will be able to evaluate your situation and make the best recommendation given all the variables in your business and partnership. In the event that an agreement cannot be reached, a qualified and reputable business attorney will be able to represent your interests in any court case the dissolution requires.
What is your Business’s value?
A key piece of information you’ll need to have and understand is the value of the business you are dissolving. You may need to have an independent valuation by a qualified third party in order to ensure the value is properly assessed so that all relevant information is available upon which to make decisions.
Liabilities and Assets – Who gets and pays for what?
Assets and liabilities may be split in accordance with the percentage of ownership. Typically, this is covered in a partnership or operating agreement. If this has been addressed in the company’s operating agreement there may still be issues associated with the separation. The best thing you can do is reach out to your business attorney with help to determine the proper way to handle assets and liabilities. Especially in small or family owned businesses, dividing the business can be very similar to divvying up assets in a divorce.
What happens to the business in the future?
This can vary greatly depending on the partnership and the business. In some cases, one partner will buy-out the other partner. In other cases, the business is dissolved, and assets reallocated between all partners based on percentages of ownership. Another option is to sell the business to a third party. This is something that your business attorney can help you work out as well.
A business attorney can help you draft a partnership agreement that protects you, your partner, and your business. Even if it’s too late to save your partnership, you need solid legal advice and representation. If you have any additional questions about partnership agreements or wish to discuss other related legal issues, call Stephen Rizzieri at 214.434.1017 or fill out the form on our site today.