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How To Execute A Business ‘Divorce’ Without Hard Feelings

As the founder of an online resource specializing in all things marriage (including divorce), I’ve come to learn that business relationships have many parallels to marriage and intimate relationships. They start with enthusiasm and passion, they grow through balance and communication, and they endure the peaks and valleys of life.

But sometimes, they also end. Divorce for couples comes in all forms, from amicable “we’ve both changed” separations to prolonged battles involving property and child custody. When you find a business partner, you’re investing your future in them; the commitment is akin to marriage. And the end of that partnership — the business divorce — is just like a marital one: It can be clean, or it can be ugly. Instead of kids and houses, you have vendors, staff and partners.

So, how do you prevent a business dissolution from getting ugly? Here are five key points to consider when you’re thinking of launching a business partnership. Heed these early on, and any possible separation down the road will be much less painful.

Your Business Partner: Finding Mr./Ms. Right

Nobody wants to plan for separation, but it helps to find someone who is compatible with your communication style and thought process: someone who can navigate your strengths and weaknesses with an underlying trust. In business relationships, this can be easier said than done. But when finding that perfect partner, it’s best to consider how well you work together in high-pressure situations. This should trump friendship, history and even ideas, because without it, things will become problematic at the first obstacle. This also makes dissolution much more collaborative rather than combative.

Vesting: The Prenup

The one key difference between a marriage and a business partnership is that asking for a prenuptial agreement can often be accompanied by hurt feelings and suspicion. In marriage, it’s easy for one person to take it as an insult: a safety net doubling as a hedged bet. But in business, having clean and clear language about processes, protocols, vesting, expectations, and what belongs to whom is often acknowledged as smart and safe. This should be regularly reviewed and updated to smooth out all future paths. Remember, the goal is to grow your business into a large and successful entity, possibly a public one complete with a board and corporate rules. It might even be on the path to getting absorbed by a larger competitor. All of these avenues should be considered.

Partnership: The Marriage

Is it counterproductive to go into a marriage thinking it might fail? Only if you view it from a purely negative lens. But if you understand that the foundation of a successful marriage also works as a means to a clean and amicable separation, then it puts things into perspective. To that end, regular communication and honesty are absolute musts. Issues should be confronted head on, and the business equivalent of date nights — activities that strengthen team bonds — establish a history and communal experience that brings forth mutual respect. In most cases, that respect is the key ingredient that will bring about a peaceful dissolution.

Advisory Boards: Counseling

What happens when those inevitable disputes pop up? Healthy couples go to a marriage counselor. For businesses, that means getting qualified outside opinions. Consultants, advisory boards, and other professional entities can provide objective insight towards practical solutions and mutually beneficial paths. They can act as intermediaries during a disagreement, a third party during brainstorming, or even a tie-breaker during a stalemate. As with a marriage, sometimes it means more when you hear it from someone else — and many times, the most important aspect of these discussions is letting your guard down and keeping an open mind.

Getting Fired: The Divorce

During the many ups and downs of a long-term relationship, you can both be good, respectful people, and yet things can still go sideways. In business, it’s much the same. Perhaps your partner’s interest has wandered into a different industry, or maybe you like working in a smaller startup environment. Whatever the case, now it’s time to move on. If you have followed the steps above from the very beginning of your journey, then you will most likely have a clear path to dissolution. This includes custody of assets and shares, severance packages, royalties and other practical matters within the business. The worst thing you can do is get deep into a business partnership without foresight into such critical matters.

In a marriage, separation terms are often based on stability for children. The business equivalent is a break that allows the actual company to continue running smoothly without impacting customers, stakeholders, vendors and staff. If all parties can walk away happy and keep the business running, then a separation is as smooth as it’s going to get.

Exit Strategies

When two people enter into a marriage, they do so with the hope that it lasts forever. In business, though, there’s almost always some long-term plan, and that often includes an exit strategy. This may be the biggest difference between marriage and a business partnership: With love, you want it to last. With business, you want it to be successful, but perhaps to a point where you can leave. Whether your exit was loosely planned from the beginning or a byproduct of difficult times, remember that keeping a grounded, practical eye on dissolution from day one can mean that everyone walks away with no hard feelings.

 

How the Law Office of Scott A. Ferris, P.A. Can Help

If you, a friend or a family member find themselves in a situation such as this, please call the Law Office of Scott A. Ferris, P.A. at 305 670-3330 right away. Scott A. Ferris, Esq. is a licensed trial attorney who has been practicing law since 1987. He is available whenever you need him to defend your rights. Please learn about our firm at www.FerrisLawFirm.com.

Republished by the Law Office of Scott A. Ferris, P.A.

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