In many ways, a business partnership is similar to a marital relationship. People combine responsibilities and share risks. They also rely on one another for certain functions and mutually benefit from one another’s success.
Many people enter into business partnerships with the expectation that the relationship should last indefinitely, much like marriage. However, issues ranging from unmet expectations to a mismatch of personal values can lead to business partners falling out with one another.
When that happens, the company could be at risk. Many people refer to a partnership buyout scenario as a business divorce. It can easily become quite messy, and the organization could be at risk. People intending to propose a partnership buyout often need to navigate the situation very carefully. The three tips below can help limit the risk of a messy and acrimonious business divorce.
Defer to prior arrangements
Ideally, partners enter their working relationship with a thorough contract. That contract should include terms for settling a request to buy out a partner. Reviewing the terms included in a partnership agreement can help one partner ensure that they uphold their contractual obligations and meet the expectations of the other partner.
Gather documentation in advance
Partnership buyouts are often the result of a mismatch of values, issues with performance, concerns about investments or even breaches of fiduciary duty, such as embezzlement. When one partner wants to buy out the other, they may need to make an effort to prove that there have been issues that could affect the long-term viability of the partnership.
Collecting evidence related to questionable financial transactions or other concerns can help one partner make a more compelling case when they eventually propose the buyout. They can also preserve evidence that the other partner might hide or destroy during negotiations.
Approach the topic gently
Unless the partners are currently embroiled in an intensely hostile dispute, a sit-down meeting to discuss the proposal is often the best option. The partner suggesting the buyout may need to make their case briefly and then give the other partner time to digest that process and respond after a few days. Trying to force the matter quickly may only result in bad blood and more pushback from the partner who may soon exit the organization.
Typically, those preparing for a partnership buyout need the support of a legal professional to protect themselves and the business that they run. Having the right strategy when proposing a business divorce can help partners protect their investment and the organization itself.