Ending a Partnership - How to Remain Friends After the Break-up
It all started so well. You went into business with a friend or colleague, and for awhile everything was great. But as time went on you realized it wasn't working. Now you want to dissolve the partnership but you're worried it will ruin your friendship. You need to find a way out of the business relationship that doesn't leave you hating each other at the end of the process.
Sounds a lot like ending a marriage, doesn't it? And the fallout of terminating the relationship can be just as acrimonious as a failed marriage. But there are steps you can take to make the transition less painful for both of you.
1. Put everything in writing.
Hopefully you had the foresight to draw up a Partnership Agreement at the outset. A well written Partnership Agreement will cover how the parties are to proceed if the relationship is terminated, how profits and losses will be allocated and assets distributed, and an option for one partner to carry on the business if the other wants to withdraw. But if you didn't formalize the partnership in writing at startup, you can still formalize the breakup with a Partnership Dissolution Agreement.
2. Play nice.
It's never wise in business to burn your bridges, so keep a smile on your face, mind your manners, and treat your soon-to-be-ex-partner as you would like to be treated. The more civil you can be during your break-up negotiations, the smoother the transition will be. And it will make your mother proud.
3. Seek professional advice and input.
Your lawyer and your accountant should both be involved in the process. After all, that's why you hired them - to give you advice. They're the experts when it comes to the tax and legal implications of dissolving a partnership. They have no emotional attachment to the business, which is a distinct advantage because all breakups - professional as well as personal - are fraught with emotion for the parties involved. You should also hold a formal partners meeting to discuss the dissolution and have an outside third party present to take notes of the proceedings. The presence of outsiders often helps to allow cooler heads to prevail.
4. Be reasonable.
Don't be greedy and don't make unreasonable demands. Try to come up with an exit plan that works for everyone. Put the emotions aside (see points #2 and #3 above) and negotiate in good faith.
5. Keep the lines of communication open.
You would never have gone into partnership with these people unless you felt that your respective skills and talents meshed well. As mentioned above, never burn bridges if you can avoid it. The day may come when you need to call on the skills of an ex-partner for a project, so staying on good terms is essential. So long as you can keep talking, you can work your way through the bad feelings and get to a better place where you both feel more comfortable.
6. End it quickly.
Forget the long drawn-out drama and just cut to the chase as quickly as possible. That way you can all get on with your respective careers in a more positive and productive environment.
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