Business partnerships may end for a number of reasons. In fact, roughly 70 percent of business partnerships either fail or are dissolved.
In many cases, the business partners may no longer see eye to eye. In other cases, the partners may be ready to move on to other ventures when they feel the agreement no longer suits their needs. Partnership dissolutions can be complex and contentious because the partners’ financial interests are on the line. Here are some tips for ending a business partnership as smoothly as possible and hopefully avoiding a dispute or litigation.
Each partnership agreement should have a dissolution clause. It is one of the most important parts of the contract. This clause will spell out your rights and the procedures that are to be used to dissolve the partnership. The dissolution clause will be the first thing a court would look at in the event of litigation regarding ending your partnership.
Before you even raise the possibility of winding up or dissolving a business partnership, you should closely study the dissolution clause. You will need to closely follow it in order to protect your own rights and interests.
When a partnership ends, each partner has their own financial interests they are trying to protect. While each party will not get everything they want, you should consider the other partners’ interests in discussions about dissolution. Try to be reasonable to the extent you can. It may help facilitate a smoother and less acrimonious end to the partnership. A partner who insists on having everything their way may cause the parties to end up in court.
Even if a partnership is ending on less than friendly terms, it is essential to try to be courteous and graceful to avoid further inflaming tensions. Communication and compromise can help the partners avoid costly commercial litigation.
Even if there are bad feelings, it is vital to keep everything about business and not make a dispute personal. Even though you may have to swallow your pride, you should do everything you can to resolve matters as amicably as possible. Personal conflicts are often what cause bad situations to spiral out of control into litigious ones.
Litigation will cost you a lot of money because it is a lengthy and contentious process. In the meanwhile, you will have your time taken up with a court case, affecting your ability to start over again or earn a living. Litigation should be avoided when possible.
There are intermediate steps between a dispute arising and going to court. In some instances, you may benefit from the assistance of an objective third party who can help you and the other partners talk and resolve disputes. A mediator costs a fraction of the cost of a lawsuit, and they can increase the chances of dissolving a partnership amicably.
There is not much point in dragging things out when you are ending a business relationship. The longer things go on, the more of a chance that relations between you and the other partners can deteriorate and take the dissolution to a bad place. Once you decide to end the partnership, you should move quickly towards that goal. It will protect you financially and help you move on to something else. Although you should not rush if it means mistakes, you should also be dedicated to the process and not let things sit and idle unnecessarily.
When you are dissolving a partnership, your legal rights and financial interests are on the line. If you are not careful, the dissolution could end up costing you far more money than it should because the other partners have taken advantage of you and taken liberties with your partnership agreement.
An experienced partnership dispute lawyer can look after your interests during the dissolution process. They can handle negotiations with other partners on your behalf, both to keep you above the fray and to bring their experience to the table. Having a third party deal with the other partners can lower the temperature when there are emotions involved.
Hiring a business attorney does not ensure there will be litigation. In fact, it could increase the chances that your dispute may be resolved peacefully. Legal expertise is a worthwhile investment when your livelihood and hard-earned assets are at stake.
Your financial interests may depend on the valuation of the business and its assets. You may need experts in business valuation and accounting to help value the assets and your own share of the business. You should never take a non-expert’s word for it. You may even be required by the terms of the partnership agreement or by the court to get an independent business valuation prior to ending the partnership.
There may also be tax consequences when you wind down a partnership. How you negotiate the end of your business arrangement could determine whether you face a large tax bill. You should also consult with an accountant who may have ideas on how to structure the dissolution of your partnership in a way that can save you money.
The ending of a business partnership is complicated and can be difficult; however, there are steps you can take to make it less stressful on your end and increase the chances that you can dissolve the business arrangement amicably.