13. Address the “Dreaded D’s.”
Ideally, all partners were proactive at the time that they formed the partnership and hired a small business attorney to draft a Buy Sell Agreement. Such an Agreement should have addressed the “Dreaded D’s” — death, disagreement and disability. Any circumstances or changes that have occurred since the inception of the Buy Sell Agreement should be handled by direct negotiation between the partners, or, if they cannot agree, by a professional mediator as provided for in the Buy Sell Agreement.
14. Use small business mediation.
Use a neutral small business mediator to help you assess your real needs and business interests. A mediator can help you communicate through the emotional rapids of a breakup and reach more peaceful waters of a new beginning.
15. Focus on the future.
What rights do you have to use the company’s intellectual property going forward? Can you contact the company’s clients? Will you be on the hook for any company debts or obligations? You’ll want to cover all this and more in a written agreement with your soon-to-be “business ex” to make sure there are no loose ends that could hang you down the road. Remember, a setback is only a setup for something greater!
16. Remember mediation costs less.
I always recommend that my “business divorce” clients participate in mediation if a break-up is required. It is private, confidential and cost-effective; less than 10 percent of the cost of litigation. Mediation also allows for the airing of certain issues that are not normally admissible in court. It’s the best way to go if all owners want the business to survive the breakup.
17. Don’t forget the dissolution clause.
Everyone thinks going into business with your brother, best friend from elementary school or roommate from college will be the easiest thing to do because you always get along. That was before money was involved. The most important way to deal with a partnership breakup is to have a written agreement before you start, which spells out all of the rights and responsibilities of all parties. The most important part of the agreement is the dissolution clause. While you can never have a guarantee against litigation, a properly drafted dissolution clause can often save much stress and years of litigation.
18. CYA and seek professional help.
Seek professional help before the situation gets too bad. A qualified and trained professional, such as an attorney, business breakup consultant, or accountant can help you decipher (a) what issues can be worked out and which issues will require more serious intervention, (b) gather any documents (emails, corporate governance documents, agreements, etc.) you may need to support your position and/or defend any positions taken by your partner(s), and (c) act expeditiously, but not irrationally.
19. Read this book first.
Have the difficult conversations before you partner up, and brainstorm potential obstacles you might encounter— both in business and in your personal lives. These things will inevitably affect your business, like it or not. The Partnership Charter: How To Start Out Right With Your New Business Partnership (or Fix The One You’re In) by David Gage is one of the best resources I have ever found for beginning these conversations. After you have them, incorporate an action plan into your Partnership Agreement and continue the conversation annually by following through on your commitment to hold an annual meeting.