When you're ending a business partnership, the break-up can be easy--if you've created a proper partnership agreement at the outset. When you're starting out your partnership, whether it's with a family member, friend, or other associate, you can feel full of hope and optimism. You both have a great idea for a business; and you've spent hours going over all the details about how you're going to carry out your shared vision. What can go wrong...right?
But business partnerships are like marriages. In the beginning it's all about the possibilities and the hope for the future. In the end, if one of you wants out, it's all about your differences and what you think you should walk away with after it's over. But just like a marriage, a business partnership can greatly benefit from making a detailed agreement before you get started.
A partnership agreement can act like a blueprint for the operation of your business. You may agree on your vision for what you want your business to be doing down the road, but you may have different ideas about how to get there. The partnership agreement can include such things as: which of you will handle what duties and responsibilities in running the business; how you will handle your profits and losses; what each of you will take for your compensation; and what your duties are to each other in the ongoing company.
A partnership agreement can also act like a set of instructions for taking apart the business if it's over, or for continuing the business if one partner wants to withdraw and the other wants to continue. No one wants to think about the end of the business when you're just getting started; just like no one wants to think about divorce before the marriage. But you can save a lot of money and heartache later if you plan for the possibility of a break-up before you unite.
When the relationship is over, you'll need to deal with many hot topics:
· what will happen with ongoing obligations, like contracts with customers and leases for office space?
· how will creditors and taxes be paid?
· if one partner wants to continue the business, what formula or process will you use to figure out how much the other partner's interest is worth for a buyout?
· who will own the rights to assets of the business, including customer lists?
· what other winding-up obligations will there be, and how will they be accomplished?
These topics can be covered in detail in a good partnership agreement. You can define what conditions would cause the partnership to end at all, along with issues of how it will happen.
Asking the tough questions before you form your partnership, and having a lawyer draft a detailed partnership agreement which answers those questions can be the first great decision you and your business partner will make together. It's better to save money nailing it down now, rather spending the money later while the court makes the decisions for you. Breaking up can be easy to do, with the right advance planning.
ON ANOTHER NOTE . . ., I found so many great break up letters that I created this gallery for your amusement. So even if my post is uninteresting to you, I hope you'll enjoy these.
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