Working with a partner to start a business can be a good strategy. You don’t have to take all of the risks yourself, and there is someone else to share the responsibilities and provide a fresh perspective. Partnerships can be quite useful, but they will eventually run their course.
Perhaps you are ready to retire, move on to another industry or sell your share of the business. Maybe your partner is the one who is ready to transition away from your shared company. In either case, you will need to start discussing how the two of you will handle the end of your partnership.
How can you make the end of your partnership an amicable parting of ways?
Let your partnership agreement be your guide
The contract you have with your partner establishing your individual rights and obligations to the company will also talk about the end of your business partnership. You may need to provide certain paperwork or compensation to your partner if you want to buy them out or dissolve the business. You may already have the outline for a dissolution plan.
Even if you do not, you can talk with your partner and start to arrange one. Your goal will determine the steps you take. There will be various stages to your dissolution plan, depending on your goals. Agreeing on a specific outcome is critical, as each outcome requires different paperwork. Your goal may be selling the company, dissolving the business or restructuring to buy out one partner.
Why is it so important to have a formal plan?
There are many things that can go wrong when making major changes to a business, including a disagreement between you and your partner. Agreeing to certain matters in writing early in the process ensures that everyone knows what they have to do and what to expect.
Typically, you will need to execute paperwork together. You may need to bring in outside professionals to help with business valuation or similar specialized tasks. What’s most important is that you protect yourself from liability while fulfilling your legal obligations to the company and your partner.