20. Choose your dispute resolution and stick to it.
Address the issues surrounding a potential business breakup at the beginning of the relationship. Make sure that you have a partnership or shareholders agreement, vetted or drafted by someone with experience litigating these disputes, that outlines in detail both what the parties’ rights are in the event that one or more parties do not want to continue in business together and the procedure by which any breakup or dispute will be resolved.
In addition, choose a form of dispute resolution such as mediation, arbitration or collaborative law and include in your agreement specific rules and procedures tailored to your needs that will govern the proceeding, thereby ensuring that any disputes will be resolved expeditiously and economically. Attention to this process at the outset is critically important from both a business and a legal perspective to limit the disruption to the business and to preserve as much of the business and its resources as possible for allocation or distribution in the event that a breakup occurs or a dispute arises.
These forums generally provide far more flexibility in developing both procedures and resolutions that work for both sides and, unlike courts, are not limited to specific statutory or common law remedies that may produce a bad result for all concerned.
21. Agree on the ground rules beforehand.
Agree to the steps that will be taken and the format of the dissolution long before things get acrimonious or go otherwise go downhill. A good attorney will include a section detailing such steps in any LLC or partnership agreement at the beginning of the venture. Agreeing to what will happen upon the breakup of the partnership before things get ugly not only will save the partnership legal fees upon dissolution, but also guarantees that the partners all have clarity on what the results of the dissolution will be, often making the breakup less likely to happen in the first place.
22. Prepare for unlikely events.
New business partners should have an appropriate agreement at the outset of the venture that will deal with events that are likely to occur, i.e., death, disability, divorce, bankruptcy, splitting up, etc. Having these details (and expectations) dealt with in advance, while sometimes difficult, will make it easier – and less expensive – when the business split occurs.
Robert Scott Williams, Attorney at Viera Williams, P.A.
23. Get it in writing.
Get everything in writing before you start the partnership. If you didn’t do it then, make sure you get everything in writing right now. In doing so, think about any possible imaginable scenario for after the breakup (such as unaccounted for revenue) so that there is no question how that scenario is handled by the breakup agreement.
24. Be proactive instead of reactive.
Be proactive rather than reactive in a partnership breakup (i.e., “business divorce”) situation. Don’t wait until your partnership is actually breaking up. When you know your partnership is heading in the direction of a breakup, you should hire or at least consult with an attorney who specializes in partnership matters, general business law, and/or commercial litigation. Invariably there are business assets you will want to control, such as client lists, bank accounts, receivables, equipment, and intellectual property. Your attorney can help you identify those assets and create a strategy to retain them as well as make you aware of any potential liabilities that you may face.