When to dissolve your relationship with your business partner

On Behalf of | Nov 17, 2019 | Firm News |

Dissolving a relationship with a business partner is not nearly as easy as simply firing an employee. Perhaps you both started the company together. Neither one of you is in a position of leadership over the other. You both have invested time, money, energy and emotion into the company.

That said, there are times when it’s clear that you need to break off this partnership. Some red flags you may see include:

  • It’s all you can do to spend the work day together. You have personality conflicts that make it so that you dread that time and would never spend extra hours together unless you had to. Some call this the vacation test. If you would never go on a vacation together, should you work together?
  • You do more of the work and shoulder more of the load. Things just do not feel fair. Maybe you spend long hours at the office, putting in at least 60 hours per week. Your partner constantly shows up late and leaves early. You need to work with someone who is as dedicated as you.
  • They try to cover up mistakes and important facts if they made a mistake. You have to be honest with each other. If they make a mistake and try to keep you from finding out about it, or if they lie about income or expenses to make it fit the budget, they’re not someone you can trust to work in your company.
  • They want to stay involved but have little to offer. This often happens with young start-up companies. Maybe you partnered up with someone who was already your friend because they got excited about the idea. After working together, though, you realize that they have very little to offer. You can do their job better than they can. Maybe they are even holding you back.

So, what do you do if you see these red flags and decide to break off the partnership? First, review where you stand. Did you create a partnership agreement when you started the business? Does it tell you what next steps to take? If not, how will you determine who gets to make decisions about involvement, how much ownership each person has and things of this nature? Do you have a legal obligation to buy out your partner’s ownership when removing them from the company? Are there any other co-owners who need to vote?

These are not the only questions you need to ask, but they are helpful and they give you a good place to begin. Make sure you understand your legal position and exactly what steps you need to take in what can be a fairly difficult situation.