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Breaking up is NOT hard to do.

Dissolving a business partnership

Neal Sedaka crooned famously that ‘Breaking up is hard to do’ in one of his all time hit singles. But this needn’t be the case when dissolving a business partnership.

Many businesses are established as a partnership between two or more individuals, many times friends and business colleagues. All too often this partnership is not formed with enough forethought and planning on how to form this business partnership. What then happens is that the partners get stuck in their business with an arrangement that isn’t working well?

Having a partnership agreement that is properly drafted and vetted by a trained legal professional is critical and a necessary consideration for a good exit strategy. (Many partnerships use a partnership template form that is readily available from companies like Legal Zoom and others. These are good starting point but generally don’t include enough specificity about how to dissolve the partnership).

Listen to Podcast on this subject – Breaking up is Not had to do

Unlike the sale of a business or other common business exit options, the breaking up of a partnership is something that can be and should be pre-planned. Creating a buy-sell agreement is a critical and necessary component of any comprehensive business exit strategy and business partnership agreement. Think of it as a Pre-Nup for your business.

Even though the dissolution of a business is generally a traumatic experience, and certainly in the case of a medical situation or death of a partner, it does NOT have to be hard to do in terms of the mechanics of it. Unfortunately it will be much more difficult, costly and draw-out if the partnership agreements are not continually reviewed and revised as necessary to reflect the current business conditions and the anticipated future changes to the business and the partners.

Ask yourself The Big Picture Question

Did you and your partner(s) hammer out your common objectives for your partnership? If you are in a current partnership – do you review and revise your partnership agreements annually? Have your partnership dynamics changed over time?

Here’s a quick tip or suggestion  

Create a partnership checklist. This checklist should include the objectives of the partnership, how the partnership will work, what tasks and responsibilities each partner will have, what partnership issues should be reviewed annually. Make the checklist comprehensive. This is the basis for your written and legal business partnership agreement as well as a resource for amicably dissolving a partnership.

Building a business alone is the toughest and riskiest path of entrepreneurship to take. Having a partner(s) can be the difference between success and failure. But, only if the partnership issues have been agreed upon and worked out in advance.

 

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