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3 reasons it may be time to consider a business divorce

On Behalf of | Sep 16, 2022 | Business Law

Talking about a business partnership with someone is an awful lot like proposing marriage. You will essentially suggest that the two of you work cooperatively for years to come. There needs to be a foundation of trust for such a relationship to work, and both of you need to have the same goals and priorities.

Unfortunately for those running a business with a partner, their business relationship could eventually degrade much like a marriage might. Those who are unhappy in their marriages or realize that they no longer share the same goals and values as their spouses can divorce.

Business partners also have the right to pursue a business divorce or a dissolution of their partnership. What does the end of your partnership usually involve?

A buyout agreement

Frequently, partners disagree about what should become of their business or how they should continue to run and grow the company. If you dream of expanding but your partner wants to retire, offering to buy them out might be the perfect solution.

On the other hand, if your partner wants to sell the company to someone but you aren’t ready to stop working, you might want to accept their buyout offer and pursue a new job elsewhere. Buyout agreements often reflect terms that the two of you set in your partnership agreements. Other times, if you don’t already have rules in place for a buyout, you will need to carefully value the company and then negotiate terms that are favorable for both of you.

You may need to dissolve the business

If a buyout isn’t feasible or if you simply can’t reach a mutual compromise, then the dissolution of your partnership and the underlying business may be the simplest solution. You may agree to share sale proceeds and/or business assets. You can use your share of that money or those physical business belongings to help you start a new company that you own by yourself or that you incorporate.

Other approaches to business divorce may also be possible. You could sell the company instead of closing it, which could allow both of you to exit the company simultaneously or one of you to stay to provide transition support. Thinking carefully about your long-term goals can help you decide the best approach when considering the end of a business partnership.