6. Clarify your objectives.
If you are thinking of getting a “business divorce” it important to clarify your objectives. Your business breakup will impact the business. The issue is whether or not it will have a significant impact on the business and its operations. Decide (1) What you are willing to accept from the other side to resolve the conflict? (2) If you will seek a buyout, retirement, division of the business or sale? And (3) What have your business partner will accept to resolve this matter? Also, identify what resources both of you have at your disposal in a worst-case scenario.
7. Seek professional advice.
Find a small business attorney, mediator or an experienced entrepreneur who has seen something similar and can help you. Seeking professional advice to help you understand legal rights and obligations and ensure that one partner does not make a legal mistake which would exacerbate the problem. Remember, this is a business matter, not a personal one, and it needs to be handled as such.
8. If you don’t have an agreement cut your losses.
An ounce of prevention is invaluable. At the outset of the business relationship, put the equivalent of a business prenup in place to clarify confidentiality provisions, ownership of intellectual property, non-competition restrictions, and a buy-sell to indicate who gets what and for how much if you split. If you haven’t taken these steps in advance, look forward not backward, cut your losses, and move on rather than wasting valuable time and energy fighting over the past. And get a new attorney the next time around!
9. Discuss the end at the beginning.
First and foremost, the dissolution of the corporation or the partnership is something that should be addressed at the beginning the venture. All parties should agree to the division of the assets, if any, after the dissolution. Second, agree on the valuation of the assets or the business during the formation of the partnership or business entity. Everyone can be more objective at that point in time. Waiting until the venture is failing will only lead to finger pointing and ultimately, litigation.
Dominick L. Lanzito, Shareholder at Querrey & Harrow, Ltd.
10. Put your customers first.
Make things as easy as possible for your customer base. At least one partner, may want to continue in the same business. A breakdown in communications between partners can lead to confusion for your customers, and a loss of good will in your industry.
11. Put everything in writing.
First, check your partnership or operating agreement to see which, if any, terms will apply during the business breakup. Get your Buy/Sell and other dissolution provisions in place as soon as you consummate the partnership. If you don’t have such an agreement, you need to remember that fighting takes more time, money, and energy than asking each other what you want and trying to walk away amicably. Put these responses in writing, so if they come back later, you’ll have proof of what they wanted.
12. 6 Do’s and Don’ts for Dissolution.
During the dissolution process, it is essential to remain a good business person. The top three issues anyone dissolving a partnership should keep in mind includes (1) Maintain your integrity; (2) Preserve all business contacts, especially referral sources and (3) Ensure fairness in all professional and personal dealings. The top three things not to do when dissolving a partnership are: (1) Don’t let your customers’ concerns and needs fall by the wayside, (2) Don’t speak negatively about others involved with the dissolution and (3) Don’t broadcast unnecessary information to the public.