How To End a Business Partnership

One of the greatest mistakes business professionals can make when creating a partnership is to ignore the dissolution of a partnership. Why discuss partnership dissolution at the beginning of a partnership? Understand that partnership is like life; all things must come to an end. The better you can prepare for the end, the better for the partnership. Recognize that the dissolution of a partnership is not necessarily negative, because it can be a very positive thing.
What are some of the things that can lead to partnership dissolution or what I call “The Business Divorce Conversation?”

Change in life situationsr
Acquisition by another companyr
Business Failure

Life Situations

Life events, such as the death of a family member or the death of a partner, can create a situation in which the remaining business partner(s) no longer wishes to continue with the business in its current structure. Even happier situations such as a growing family or the need to relocate can help contribute to the end of the business.

Acquisition

What happens if another company wishes to acquire the business? What occurs when one partner desires to sell the business but one or more partners do not? Determining ahead of time exactly what the rules are for how to handle membership valuations and the process for internally or exte
ally reclaiming and disposing of ownership value can mean the difference between a legal battle or the celebration of success.

Business Failure

Sometimes a partnership is not strong enough to hold a business together. Perhaps the concept or the business objective are no longer relevant or appropriate. Sometimes the financing structure of the business has changed or become inappropriate. Whatever the case, it is important for partners to discuss and create standing contingencies for what happens if the business fails. What happens to the remaining assets? Who is responsible for what activities?

Partnership Divorce

I encourage everyone who is considering a business partnership to create a Buy-Sell Agreement. A Buy-Sell Agreement basically covers the options each partner will have in case of business partnership dissolution, where the business continues to operate under the control of the remaining partner(s). The Buy-Sell Agreement addresses how the business will be valued, what the respective partner ownership shares are worth, and how the partners succeed or are succeeded, if there is a death or a desire for a partner to exit the business for a variety of reasons.