Unfortunately, it happens. Not every partnership is going to make it. Partnerships struggle and people change. In fact, one of the things I talk about in my speeches, www.ourshawnmcbridelive.com/presentations, is the fact that life is going to change and the values and interests of partners will often change. Meaning the partners that are in perfect alignment today, may not be in alignment in the future and we just need to be realistic about the fact that there could be changes in values and interests, and that’s okay. We’ll go a different direction.
How do we make it to where partners can part ways? How do we build things to make the economic value, creative? Well if you don’t have a plan, you’re often going to end up in a courthouse. Unless you can negotiate a settlement, you’ll end up in a lawsuit where one partner will sue the other over what happened in the partnership. This is not where you want to spend your time or money. These are cumbersome processes, they take a lot of time, they’re expensive, and typically the business does not thrive while partnership disputes are going on. What is preferred is to have a method to protect the economic value. What we often see is partnership agreements where we have negotiated exits with valuations that are set in advance, (you don’t want to be agreeing to the value at the time of dispute), and exit mechanisms, which are agreed in advance. This allows us to have some degree of certainty as to what would happen. We know the valuations, we know the process for the exit.
The only thing left is there may be some hard feelings because one person maybe upset that they got exited or that they had to buy the other person out, but it’s fair. We know the amounts, we know the system, and we’ve agreed to all of that in advance. So it really does help us to make sure that we’re going to do the right thing and more importantly, it saves all the wasted time and resources. We need to be realistic in business. And what’s realistic is that not every partnership is going to last, but we can be realistic and build systems and processes to protect the wealth so that even if the partnership breaks up, the partners can still look back and enjoy the economic fruits of their labor.
What’s been your experience with this? Have you had partnership disputes or issues in the past? What are you doing differently in the future to protect yourself?
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Michel Meynsbrughen.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment, gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can email R. Shawn McBride or (214) 418-0258.