Breaking Up is Hard to Do


Your business partner is not pulling their weight. Unless you can lower your expectations there will come a time when you decide to go it alone. 

You go to the lawyer who has been acting for the partnership to whinge about the other partner. However, he tells you that he has a conflict of interest and he cannot act for you.


You choose another lawyer. He will be tempted to lecture you on the imprudence of entering into business without a partnership agreement. If this takes any more than half an hour, you may not have made the right choice of lawyer. Of course, you don't have a partnership agreement! Who does he think you are, BHP?


If you do not have a partnership agreement then the law generally lays down about ten ground rules:


1.  Partners must make financial contributions equally;

2.  Partners are equally responsible for the debts of the partnership;

3.  A partner may need to pay up the whole debt, not just half, and then seek reimbursement from the other partner;

4.  There is no salary for acting in the partnership business, regardless of how much more you have worked than your partner;

5.  All property bought by the partnership is partnership property;

6.  Partners must be truthful and tell each other everything about the partnership business (tough, I know);

7.  Partners must account for any benefit received using partnership property or concerning the partnership;

8.  Persons dealing with the partnership can assume it still exists until given notice that it has been terminated;

9.  Partners can do everything necessary to wind up the partnership. If they do not complete existing contracts they could be sued; and

10.            Partners are entitled to have partnership property applied in payment of the debts and then applied to what is due to each of them.

Your lawyer will advise you that it is in your business interests to be seen to have an amicable split. This does not mean that you necessarily remain friends. 

If there is advantage to you a lot can be gained through negotiations, so do not close this door. Where negotiations fail the more expensive alternative of court action to seek a final settlement may be an option. Sun Tzu advised that the object is not to destroy but to take what you can get in this case without depleting the business assets beyond that which is required. He also advised that the longer war goes on the more it costs which is true for litigation too.

However, if you have only been together as partners for a year or two, although the potential is great, in reality the partnership may not be worth anything. You may feel bitter, find it hard to put the relationship down to experience and walk away however, if that is the advice you are given, take it.

© Paul Brennan 2008-2018. All rights Reserved.


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