Much like marriages that go through a divorce settlements, businesses too have their fair share of fallouts. Like messy divorces, business break-ups can also get dirty. It is for this reason that business partners need to have an arrangement in place that details the terms of their separation. There are endless reasons for business associates to split up, from a planned buyout to a dispute that turns into litigation, etc. If there is anything that is certain it is that most business relationships are strained and most likely to not last indefinitely.
We list reasons why you need to plan for the worst from the get-go.
No entrepreneur begins his\her business with dissolution in mind. But when the going gets tough, even the slightest of issues becomes a full blown temper tantrum. All the more reason for business partners to lay down the terms of separation, when they still have a cordial relationship. This will ensure that the business remains to be a different entity and continues to function without any restrain from the partners.
Decisions made with a clear head will always be considered as more viable. But a hurried and vindictive turn of events makes the whole process a prolonged and counter-productive. It is for this reason that you should talk about asset allocation right from the beginning. You are calm and collected at the start of your business and in the perfect position to make rational decisions.
Word of mouth is all but lip service and has as much credulity to it. Involvement of legal supervision will bring about a smoother transition, as there will be clarity on who stands where when the business is dissolved. The details of the termination will be clear in the minds of both partners and everybody involved will be aware about what happens to the clients, the employees and so on and so forth.
No matter how good a run you had with your partner, when there's money involved, business affairs are bound to get messy. In order to avoid confusion and disarray, it's better to keep all business dealings transparent. So when there is a split, everything is divided right to the middle and done by the book.
It goes without saying that business partners turn into the best of friends over time. If a dissolution is on the horizon, don't ruin the friendship by harbouring resentment and bad-mouthing the other in the heat of the moment. Remember, no wealth in the world is greater than relationships.
If you're about to start your own business with a friend or you already have a set business in place, it is best to have an exit strategy right from the very start. Read and re-read the above mentioned points till you are convinced to draw a contract that will protect yours as well as your partner's interest in the face of dissolution.