Ending any sort of partnership can be challenging, requiring reflections on what went wrong and where to go from here. When it becomes clear that your business partnership must come to an end, you may wonder how to approach ending the relationship.
Partnerships can involve some risk, as many successful entrepreneurs partner with those that bring complementary skillsets to the business. Yet, your different perspectives may lead to fundamental differences later on. Because the consequences of rushing into a decision can greatly affect both you and your business, carefully consider your options to move forward without your partner.
Planning ahead for a change in the partnership
Planning for a wide array of situations in which the business partnership could change can help to mitigate future risk and uncertainty. When drafting your partnership agreement, discuss options for ending the partnership due to death, incapacity, personal disagreements or differences and more. Preparing for these unexpected scenarios in your partnership agreement can benefit your business by having a plan in place to ease a potential transition.
Tips for ending a partnership without a plan in place
One partner may fail to carry out their share of responsibilities, lose interest in the business, consistently clash with other partners on key decisions and more. Whatever the reasoning may be for seeking an end to your partnership, when your partnership agreement does not detail terms for a partner exit, your options may include:
- Buying out the shares of one partner. When one partner wishes to withdraw from the business, draft a plan to buy out their shares to continue the business.
- Selling the partnership. A sale of the partnership can be an alternative to closing the business yet still terminates the partnership.
- Dissolving the partnership. You both may decide dissolving the business is best. Work with an attorney to abide by Illinois rules in the dissolution process.
In some situations, the decision to end the partnership may not be mutual. When a disagreement requires legal intervention, consider an alternative dispute resolution (ADR) technique like mediation or arbitration, before resorting to litigation if necessary.
Whether your business partner is your friend, family member, long-time colleague or more, ending the relationship can be difficult. Communicate clearly, identify your goals and work with professionals to execute a clean split that protects your interests.