Business Partner Problems: Options and Resolutions
In an ideal business partnership, everyone contributes their time and labor toward making the company a success. When a partner isn't pulling her weight, it's essential to address the problem before resentments develop and the business suffers. In many cases, simply having a frank discussion can resolve your issues. If this doesn't work, however, you may need to seek expert professional and legal advice to disentangle yourself from the business.
Address the Issue
Many business conflicts can be resolved or managed through open communication. If you are unhappy with the contributions a partner has made, one option is to simply speak to him about your concerns. Explain what you have observed and how you are feeling, without being accusatory or hostile. It may be that your partner is undergoing personal struggles that have undermined his ability to participate in the business effectively.
After you've had a chance to talk, work together so you can agree on what is expected from each partner in the business. Put these expectations in writing, and consider establishing a timeline by which specific activity and performance goals will be met.
Tip
Before talking to your partner, review your partnership agreement and also the incorporation papers. They may contain language that can help you find a way forward during the current conflict. Take note as to whether there is language in the agreement that can mandate a buyout in situations in which there is conflict between partners. Knowing what is included in the agreement can help you understand your options, if you and your partner are unable to resolve your differences.
Bring in Outside Help
If your partner proves resistant to what you have to say or you are having difficulty agreeing on how you want to divide responsibilities, you might want to bring in a neutral third party to assist with communication and to develop an acceptable resolution to your current conflict. A business psychologist might be helpful, as would a professional mediator who has experience in working with business partners.
Bringing in a neutral mediator can be particularly helpful if there are more than two partners in your business but only one partner that the others perceive as nonperforming. The presence of a third party who is unconnected to your organization may help prevent that partner from feeling isolated or bullied.
Pursue Legal Action
If negotiations continue to go nowhere, it may be time to contact a lawyer. An attorney can review the current status of your business and may be able to assist in negotiating a resolution for you and your partner or partners. Sometimes the fact that you've sought legal representation may be enough to persuade your partner to take the situation seriously and agree to either contribute more to the business or to reassess her role in the company.
If your partnership agreement does provide for removing a partner from your business, your attorney may be able to activate that clause while either offering a buyout option or figuring out a way to dissolve the company. In a buyout – you, and any other partners – offer to purchase the non-performing partner's shares of the business. In a dissolution, the company itself is dissolved, debts are paid, and any remaining assets are distributed among the partners.
In cases where a buyout or dissolution appears to be inevitable, be prepared to hire accounting and legal experts who will determine the value of the business. This is important when determining a potential buyout offer or the allocation of assets after the partnership dissolves.
Tip
One alternative to a buyout or a dissolution is to restructure the partnership so that one of you owns a more significant share in the company than the other. This is called weighting, and it can be a good option if you have a partner who is capable of making useful contributions to the business, but not able to assume the level of responsibility that you can. If the partnership is weighted, you'll have a majority stake in the company and have greater control over the direction of your business.
Post-Partnership Follow-Up
Once your partnership has been dissolved, either through a buyout or through some other means, the Small Business Administration recommends that you take steps to notify clients, vendors and tax agencies, such as the IRS, about the change. This can be particularly important if your former partner intends to remain in the same industry, as you'll want to ensure that business associates and customers know that your business is separate from that of your former partner.
Preventing Problems in the Future
If you decide to take on another business partner in the future – either in your current business – or in a new business, there are steps you can take to keep this scenario from repeating itself. These include the following:
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Evaluating potential partners: Good friends don't always make good business partners. In a business partnership, personalities, values and cultures may clash. Make sure that you and your potential partner or partners have compatible personalities. If you are considering partnering with a stranger or strangers, consider suggesting to the others that everyone
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including yourself –
undergo a full, third-party background check. Clarifying roles and expectations: Make sure that everyone involved in your partnership understands their role within the business. This should include the amount of time each partner spends each week on business-related activities. Develop a strong partnership agreement: Once you've decided that you can work together, connect with an attorney who is experienced in creating business partnership agreements. She can help craft a partnership agreement that protects the interests of all parties, as well as those of the business. You, and your prospective partner, should also seek independent legal advice on the partnership agreement before either of you sign it.
As an expert in business management and partnership dynamics, I've spent years delving into the intricate nuances of successful collaborations and problem resolution within the business realm. My expertise is grounded in both theoretical knowledge and practical experience, having consulted with numerous businesses facing partnership challenges and personally navigating such situations.
Now, let's dive into the concepts presented in the article "Business Partner Problems: Options and Resolutions."
Address the Issue:
The article emphasizes the importance of open communication in resolving business conflicts. It suggests having a frank discussion with a partner if there are concerns about unequal contributions. This aligns with the fundamental principle of addressing issues head-on, promoting transparency, and fostering a cooperative environment.
Reviewing Agreements:
The recommendation to review partnership agreements and incorporation papers is crucial. These legal documents often contain provisions that outline dispute resolution mechanisms, including potential buyout clauses. Understanding the terms of these agreements is pivotal when considering options for conflict resolution.
Bringing in Outside Help:
The article suggests involving neutral third parties, such as business psychologists or professional mediators, to facilitate communication and resolution. This aligns with the concept of seeking external expertise to mediate disputes, providing an unbiased perspective and potentially diffusing tension among partners.
Pursue Legal Action:
When negotiations fail, the article advises seeking legal assistance. This underscores the importance of legal guidance in navigating complex partnership disputes. Legal action may involve negotiating resolutions, activating buyout clauses, or facilitating the dissolution of the business, depending on the circ*mstances.
Buyout and Dissolution:
The article explains the processes of buyout and dissolution as potential outcomes of unresolved conflicts. It highlights the need for accounting and legal experts to assess the business's value, a crucial step in determining fair buyout offers or asset allocation during dissolution.
Restructuring the Partnership:
The concept of restructuring the partnership, known as "weighting," is introduced as an alternative to buyout or dissolution. This involves redistributing ownership shares to maintain control while accommodating the partner's contributions more appropriately.
Post-Partnership Follow-Up:
After a partnership dissolves, the article recommends notifying clients, vendors, and tax agencies about the change. This emphasizes the importance of post-partnership procedures to maintain transparency and clarify the business's separation from the former partner.
Preventing Problems in the Future:
The article concludes by offering proactive measures to prevent future partnership problems. It suggests evaluating potential partners, clarifying roles and expectations, and developing strong partnership agreements. These preventative steps align with the idea of establishing a solid foundation for partnerships from the outset.
In essence, the article provides a comprehensive guide to handling business partner problems, encompassing communication strategies, legal considerations, external interventions, and long-term preventative measures.
