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What happens when a business partnership falls through?

On Behalf of | Jun 11, 2020 | Business Law

Not all business partnerships work out. You may have started a venture with a friend or associate who seemed like-minded. Yet, disputes may have caused your relationship to sour. If working with your business partner has become untenable, you will want to consider your options for ending your partnership.

Negotiating a buyout

No matter your relationship with your business partner, your venture may be thriving. In this case, one of you will want to negotiate a buyout. You two may have drafted a partnership agreement, which detailed your buyout approach, when forming your business. Yet, you may not have written one, or you may now disapprove of the terms you agreed upon. Regardless, you will need to work with a consultant to conduct an independent valuation. They will determine your business’ value based on:

  • Assets
  • Debts
  • Income
  • Professional contacts and which partner has them
  • Projected growth rate

Once the consultant reaches a fair value, you can start negotiations with your partner. Whoever buys the other out must make sure they have proper financing. This can come through personal assets or a business-acquisition loan. The buyout cannot proceed, though, if financing is not procured.

Dissolving your partnership

Your business’ operation may no longer be feasible without both you and your partner’s involvement. Instead of negotiating a buyout, you will want to dissolve your partnership alongside the business. This process can prove simpler and less costly than a buyout. If you two had a partnership agreement, you will follow its terms of dissolution. You will also file dissolution papers with the state and cancel any licenses you hold. And you will need to contact creditors to settle any outstanding claims, as well as collect on any money owed to your business. Once you complete these formalities, you will need to sell your venture’s tangible assets and divide its financial assets. A business law attorney can provide help with navigating this complex process.

Ending a business partnership can be a painful, painstaking endeavor. Yet, it may be necessary if you and your partner are often at odds. Understanding your options and how to move forward can help you conduct your business breakup from a position of strength.