When you originally went into business with your partners, all of you had high hopes for the future. You likely believed that the partnership would last “forever” and that all partners would continue to work well together. Over the years, however, those initial high hopes and expectations have devolved into a situation where some or all of you almost hate to go to work every day because of the discord that developed between and among the partners. Now you fear that your partnership, perhaps even your business, may dissolve.
Unfortunately, you are not alone. Per Entrepreneur.com, business partnerships break up 20%-30% more often than marriages. And often, they result in just as much emotional and financial damage as divorces.
If you have not recently reviewed your written partnership agreement, you should do so. If properly drafted, it should provide you with the following information:
- The percentage you and each of your partners own in the business
- The percentage of business liabilities you and each of your partners bear responsibility for
- The buyout procedure should a partner want to end his or her affiliation with the partnership
Familiarizing yourself with these crucial partnership details prior to a breakup can not only prepare you for it, but likewise can help minimize the stress you and your other partners feel. Unless the partner who wishes to leave decides to challenge the partnership agreement itself in court, its provisions will determine what you need to do and how you need to do it.
While you should not interpret this information as legal advice, it can help you understand the importance of drafting a comprehensive partnership agreement any time you form a business partnership with other people. A well-drafted partnership agreement serves the same function as a well-drafted premarital agreement. The purpose of both is to minimize conflict and hard feelings in the event of a future breakup.