How to Dissolve a Business Partnership

Learn the proper steps to take when ending a business partnership.

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Learn the proper steps to take when ending a business partnership.

After a long run, you’ve decided to fly solo with your business, which means leaving a partner or associate behind. Extricating yourself from the relationship without a costly legal battle can be done, but it takes careful planning and diplomacy. The following tips from lawyer and Clark Wilson LLP partner Aaron Singer and lawyer Hugh McCall of Pacific Centre for Dispute Resolution Inc. should help ease the way. Think ahead The easiest way to dissolve a business relationship is to forge the separation conditions when you’re setting up shop. “The most common mistake that we see is that people come to us when they want to dissolve their business relationship and they don’t have an agreement in place,” comments Singer. “If you don’t have an agreement, then take stock and try to come up with a strategy for approaching your partner that is reasonable.” Don’t forget the good times Remember during the separation the good times you’ve shared, as well as the profits and growth. “There is all that history at stake, and if you can bring whatever conflict is happening to a non-acrimonious end, then I think everybody benefits,” says McCall. Who gets what? If one partner or shareholder is buying out the other, then determining the fair value of assets is crucial. Prepare to have very different opinions hit the table, and be ready to compromise. It’s easy to let pride or principle get in the way when determining the worth of assets you’ve worked hard to build, but remember that your partner played a part too. “If you approach with an unreasonable offer, you’re unlikely to get a reasonable response,” cautions Singer. Take the high road “Sometimes rather than communicating clearly with their partner, people will take steps to undermine them in order to try to put themselves in a position that allows them to extricate themselves from the business, but that doesn’t always work,” says Singer. Be prepared for such behaviour during the separation, and know it will shatter whatever trust is left between partners. Once communication has broken down, you can expect to pay hefty lawyers’ fees as you duke it out over the remaining assets. Plan your approach Be sure to pick the right moment; dropping the bomb on your partner on a busy Monday morning won’t help your cause in the long run. McCall recommends language that amplifies the positive. “There are ways to compliment people and show them that you appreciate who they are and still talk about the hard issues,” he says. If it’s clear that legal action is going to take place, McCall advises retaining a communications expert. “That way they can preserve the relationship, and ultimately it will cost them a lot less money than fighting over the spoils, so to speak.”