So you understand that You started a business with a friend A little trouble started. Maybe you and your friend no longer see eye to eye on the business side. Or perhaps the stress on the business is putting a strain on the relationship. Whatever the reason, it sounds like the time has come to end the business partnership with your friend.
You’d be surprised how often this happens – up to 70% All established business partnerships eventually fail. Fortunately, you’re not alone, and that means there are proven ways to end the partnership and minimize the mess.
But how do you end a business partnership with a friend without damaging the business, your reputation and if possible the friendship? In this article, we will look at the best way to dissolve a business relationship. But first, let’s look at why business relationships fail.
Why do business partnerships fail?
Running a business is hard – and it’s even harder when you have to consult with another person every step of the way. Sometimes people come in Business partnerships with friends, family, and loved ones because they expect running a business to be as easy as running a relationship, and that rarely happens. Here are some reasons why business partnerships often don’t work out.
1. Communication problems
Everyone has a unique communication style. Some of us are more comfortable sending the occasional text or email while others prefer constant check-ins, phone calls, or in-person visits. If both parties don’t learn the other’s communication style, it can quickly lead to disaster.
2. Different perspectives
Early differences in creative vision can be easy to overlook, but it’s important to address them now. You want your brand to have a defined identity, and if you and your partner have conflicting opinions, it will show in the form of a chaotic or unstable brand, which is bad for business. Additionally, if one person consistently leads without sharing the spotlight, it can create resentment.
3. Life events
Sometimes a business partnership fails due to circumstances beyond our control. We’re only human, and that means we can’t anticipate everything life throws at us. Business partners at different stages of life will experience different struggles and this makes teamwork extremely difficult.
Once you’ve recognized that your current situation isn’t working, it’s time to make a change. The first thing you should do is talk to your business partner. Setting up a private meeting to discuss matters is the first step in breaking up the partnership. Make sure to bring a recent one let’s goess assessment A written agreement to close the partnership along with the meeting.
1. Practice honest communication
Remember, both parties have to agree to end their relationship, so you need to cooperate with your business partner even during the breakup. You must talk openly and honestly with your business partner, especially when things are coming to an end. You both need to understand why the business failed or the partnership isn’t working as well as what the next steps are. Feedback from your partner can help you identify where you fell short and vice versa.
Try not to place 100% of the blame on your former business partner during negotiations. Like any other partnership, it takes two to tango, and you need to be accountable for your own achievements and mistakes that contribute to the process. Make sure your business partner is heard and understood to prevent any misunderstandings.
Tip: Appointing a mediator These meetings can help reduce tensions and make business disputes easier to navigate Mediators provide objectivity and neutrality in an otherwise high-conflict environment. They can help keep both parties calm and ensure that the distribution of resources is fair.
2. Be willing to compromise
Your former business partner may disagree with you about the future of the company you built together, and that’s where things get complicated. During the dissolution of a business partnership, you both have to make decisions about the distribution of your company’s assets. This will require some negotiation, which is another reason why a mediator is a good choice. Keep an open mind and do what you can to keep the discussion civil and fair.
3. File a partnership dissolution form
The most important thing to do when ending a business partnership is to legalize the changes First, you need to fill out a dissolved form, which says that both of you have ended the relationship These forms differ slightly by state, so make sure you fill out the correct one for your location
4. Notify customers, employees and others
Notify others, such as customers, relevant property owners and the IRS, that the business partnership is ending. If the details start to get overwhelming, you can always consult the IRS website for a List of steps to take When leaving a business partnership.
5. Reconstruction of bank and other accounts
At this point, you may want to restructure or close the accounts to reflect the new business owners. This means that if you and your partner have shared bank accounts, lines of credit, or vendor accounts, close and reopen them if possible.
This is especially important for bank and credit accounts. As long as these are in the names of the partners, both partners are liable for any debts, overdrafts or charges. If you leave the business, you want to be sure that creditors won’t come after you if the business fails to pay any outstanding debts.
6. Repair friendships if possible
After you dissolve the business partnership, it may be in your best interest to take some temporary space from your friend. Wading through file after file of legal documents is stressful and can put extra strain on your friendship. As you break up, take some time to reflect on what went wrong. Think if the friendship can be saved.
After you have separated for some time, if you feel that the friendship can be restored, take a step and contact the other party. Although things may be awkward at first, you may be able to get back to square one If not, you have to deal with what happened and learn from the experience.
Starting a business with friends Sometimes a great way to go about business. But it doesn’t always work as you want. Leaving a business partnership with a friend is not easy, but by taking the necessary legal steps you can control the damage and minimize the negative effects on the relationship.
You must protect yourself during dissolution by backing up every step of the process with legally binding documents, just in case you ever have to prove anything or go to court. Overall, it is possible to get out of the partnership if you communicate professionally.
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