Business partnerships are built with different goals than romantic partnerships, but the two share a lot of similarities, including the fact that breakups can be amicable or ugly, or fall somewhere in between. Just as is true in a divorce, a nasty partnership breakup can leave devastation in its wake. The business that was started with the highest of hopes often fails to survive the fallout.
There are several reasons why partnerships fail. Some partners lose interest or may develop a different vision for where the company is going, and that type of divergence can usually be navigated with a minimum of pain. It’s when things go beyond disagreement and become personal that partners grow to distrust or even loathe each other, and that’s when partnership breakups can become truly ugly.
Though there can be many different catalysts behind partnership breakups, in almost all cases things start to fall apart over issues of control. One partner feels that they are shouldering more than their share of the work and therefore should have more say in what is happening – or both believe their opinion in an argument to be the superior one and they have no way of resolving the issue. One of the simplest ways to prevent this dynamic is to establish who is in charge at the business’ outset. Though equal ownership may sound ideal, it can lead to standoffs, with no clear resolution when there are differences surrounding decision-making. By creating a chain of command at the outset, you can avoid a great deal of unpleasantness and allow yourself to move forward easily.
If partners are not satisfied with the idea of inequality, the alternative is to set up a partnership with equal shares but to create a structure for resolving differences before they happen, including what to do if no resolution can be achieved. Your structure may be a specific assignment of duties or seeking the opinion of an agreed-upon third party in case of discord. By anticipating the possibility of irreconcilable differences and writing buy-sell or mediation agreements into your partnership papers, you provide yourself with a remedy that allows you to keep the peace and keep the business intact.
Partnerships can be rewarding, but they can also be challenging. For assistance in navigating the problems and pitfalls, contact our experienced business attorneys today.