How to Get Out of a Business Partnership

When you started your business partnership, everything was going great.

You and your partner had a great working relationship and envisioned the same goals for your business.

However, now it appears you and your partner are moving in different directions, and you may be considering getting out of your business partnership.

“Ending a business partnership can be as challenging and emotionally difficult as ending a marriage. The best outcomes are possible when both parties to a partnership can negotiate toward an amicable separation. Unfortunately, it’s not always possible.”

Business Attorney Michael Long

Learn the signs indicating it may be time to leave your partnership. Then read on to learn how to legally get out of a business partnership. It may be possible to preserve the business—and your relationship with your partner.

Signs It’s Time to Leave Your Partnership

Partnerships can be challenging to endure if you are always at odds with your partner. You may have started your business with a harmonious relationship, but lately, things have soured. It may be difficult to determine when it’s time to leave your partnership.

If you haven’t already, review your partnership agreement to determine if your partner is upholding their responsibilities. Additionally, the following topics provide insight into whether it may be time to get out of your business partnership. 

Someone Isn’t Carrying Their Weight 

If you consistently feel that you are carrying the burden of keeping the partnership afloat, it may be time to end your business partnership.

In a partnership, both partners should have equal responsibilities. It may be time to reevaluate your partnership if you are continually working and strategizing a successful path for your business while your partner reaps the benefits of your efforts.

Disagreements 

Disagreements in planning business strategies are universal. Learning how to compromise and work effectively with your partner provides a clear path forward. Collaborating on a business strategy regarding finances, personnel, and customer service prevent issues that halt productivity.

However, if you and your partner are never in agreement and can’t seem to resolve your conflict, it may be time to legally get out of your business partnership.

Different Work Ethic

When you started your business partnership, you and your partner may have each possessed a strong work ethic. Driven by the excitement of a new business, you both worked around the clock to ensure success.

However, business growth is not always immediate. In the meantime, you may feel that your partner has lost the drive they once possessed. Furthermore, you continue to work diligently, staying focused on the ultimate goal of your business. 

You may consider discussing your concerns with your partner. But if your conversations have failed to create change and your frustrations continue, it may be time to leave your business partnership. 

Steps to End a Business Partnership 

There are several steps you need to take to end a business partnership.

Review Your Partnership Agreement 

Once you’ve decided to leave your business partnership, review your partnership agreement. The agreement may provide a procedure to leave or end the partnership. If your partnership agreement includes these procedures, review them carefully.

Consult with an experienced business attorney to ensure you properly adhere to the agreement’s procedures. An attorney can assist you in avoiding opportunities for future legal conflict. Heeding the advice of a business attorney is likely to end the partnership more smoothly.

Inform Your Partner of Your Intent to Leave 

If the relationship between you and your partner has soured, informing your partner of your intent to leave may be a difficult conversation. 

Prepare for the conversation and prevent retaliatory acts by doing the following: 

  • Put a hold on all credit cards associated with the partnership;
  • Move cash to an account that doesn’t permit immediate withdrawals; and 
  • Cap lines of credit on the partnership.

While it may seem excessive, this action may preserve the value of your business partnership. Upon dissolution, there may be proceeds remaining to divide between you and your ex-partner. 

Consider All Alternatives 

If you wish to continue the business without your partner, consider buying out your partner’s interest. Evaluate the financial and operating consequences of a buy-out.

Buying out your partner may result in an entity shift from partnership to sole proprietorship. Consider the tax implications of that transformation.

In a possible buy-out, be prepared to negotiate your interest and the value of the partnership. Engaging the services of a business attorney unrelated to the business partnership is important. 

Tips to End the Partnership Well 

Ending your business partnership is never an easy decision. As you navigate your business partnership’s demise, there are various tips for how to move forward smoothly. Limiting the possibility for conflict between you and your partner ensures the business you created may continue to succeed.

Additionally, it may be possible to preserve the relationship with your ex-partner without permanent harm.

Calm Communication 

It’s crucial to communicate with your partner when you are calm and rational. Avoid, to the best of your ability, personal feelings of anger, resentment, or frustration in any conversations. The ability to separate your own feelings from business decisions reduces opportunities for conflict.

Determine Priorities 

Before any discussions with your partner, determine your priorities. If you wish to buy out your partner’s interest and continue the business, prioritize how best to achieve this goal.

Consult with an attorney to identify any unforeseen obstacles or considerations. Presenting your partner with your plan creates a starting point for conversations regarding the future, or end, of the business partnership. 

Create a Dissolution Plan 

If dissolving the business partnership is the only way forward, create a plan, preferably with your partner, for dissolution. 

Determine a timeline for when the formal dissolution will occur. 

Hire a professional to appraise the value of your business. Knowing the value of your partnership allows for more productive negotiations during the dissolution process. 

Determine the resolution of payments and any obligations. This includes tax obligations as well as payments to vendors, contractors, and employees. 

Why Hire a Lawyer

Deciding when to leave a business partnership is a difficult personal decision. The financial and business implications of getting out of a business partnership just add to this confusion. Hiring an experienced business attorney to advise you on the best steps forward alleviates the stress associated with this challenging process.

The attorneys at BrewerLong take pride in knowing their clients. Developing a personal relationship with clients helps BrewerLong attorneys provide specialized legal counsel and guidance particular to each case. With over a decade of experience providing high-caliber legal services, BrewerLong attorneys are ready to assist you in ending a business partnership. Contact us today!

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Author Photo

Michael Long

As a decorated combat veteran, the Marines taught Michael the value of working with dedicated and skilled professionals. Michael advises both business owners and individuals in commercial transactions and dispute resolution. His complex litigation focus includes business break ups, professional liability, insurance coverage, tax, trust, real estate, contract, intellectual property, and loan disputes. The combination of his transactional and litigation experience allows Michael to see beyond just the immediate issues presented and develop practical cost effective solutions for his clients, to maximize benefits and minimize risks in both the short and long term.

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