A Business Break-Up Doesn’t Have to be Painful
Going into business, you probably had a lot of great plans. You were going to take your dream and turn it into reality. In many cases, you may have had a partner that startead the business with you. You shared the same ideals and thought you were both in it for the long haul.
Sound familiar?
If so, you’re not alone. Many businesses start as partnerships; this can be beneficial for all parties as each individual brings something different to the table.
What many don’t think about in the beginning, is that not all partnerships are successful. In fact, up to 80% of business partnerships fail. If a partnership does end, for whatever reason, it doesn’t need to spell ruin for the business, or for one of the partners.
It Starts with a Plan
You’ve created a business plan to get your business off the ground. It was critical for obtaining financing and for deciding in the direction you’d go in the first place. This is the perfect time to think about the “what-ifs.”
While the partnership may seem perfect at the start, there are any number of reasons that it could stop working in the future. Instead of dealing with the split at that time, when emotions may be high, it’s best to think about it now, as you’re getting started.
Operating Agreements should contain an exit strategy. It should outline how disputes will be settled, who will be responsible for what, and what will happen to the business itself if the partnership is dissolved.
Opening the door for transparent conversation at the start of the process will lead to a stronger partnership over time. Now’s a great time to get the conversation started.
Starting the Conversation
Sit down with your business partner during your next planning discussion and lay out your thoughts and feelings about the future of your business. Bring up the fact that you’re fully committed, but, you think a plan should be in place if the partnership would fail.
Communicate your expectations clearly. Financially, how will any business assets be divided? Will the business be able to retain its name? What would a buyout look like if the remaining partner would like to continue forward? Include the answers to these questions in your agreement. What will be expected of each party?
What Happens Without an Agreement?
When an exit strategy is not outlined, the dissolving of a partnership can be a lengthy, hostile situation. Each party will likely need to hire an attorney, and the process could lead to lengthy (and costly) litigation if a settlement cannot be agreed upon.
Regardless of your situation, whether you are looking to exit a partnership, or if you are in the early stages of creating a partnership, it might be a good idea to discuss options with an experienced business law attorney like Michael Hynum of Hynum Law in Harrisburg, Pennsylvania. Call today to set up a consultation and to discuss options. We look forward to working with you!