Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Luminary
Can You Get Rid of Your Business Partner?
Email of the week:
“My business partner steals from the business, lies about the money, and refuses to let me review the books. Is there any way that I can get rid of him?”
Yes, You Can Get Rid of Your Business Partner
The short answer is, “yes,” you can get rid of a bad business partner. The reality is a bit different. To remove a partner you’ll need to take legal action and then you must prove your case in court. That’s hard to do because you’ll have to prove intentional wrong-doing by your partner and then the court may decide to order the business dissolved. While possible, it’s rare for a partner to be removed from a partnership by order of the court.
There Might Be a Better Way to Deal with Your Bad Business Partner
Having the court remove your partner is an option but it’s a very expensive process. There are other ways to handle a bad business partner. Start by giving consideration to your monetary requirements. What is the value of your stake in the business? If your partner meets your price, are you willing to leave the company? Would you prefer to buy your partner’s interest?
If there is no substantial money at stake, you might consider getting out of the partnership with a release from all liability. Never just walk away from your partnership! You could get hit with a huge expense later.
Yes, you can get rid of your business partner but it might be better to try a different approach.
Chris Reich, Business Mediator, has fixed a lot of partnership problems
4 Alternatives to Suing Your Partner
- If it’s time to separate, and you’re clear about that, you could put an offer in front of your partner to permit the purchase of your interest. It will not be easy to get a grand price, but letting your partner know that you are willing to go could start a process that gets you out. Again, the important thing is to protect you from future claims.
- You have the power to dissolve the partnership. Ending the partnership is your nuclear option, but it has to remain in your list of possible actions if the partnership is beyond repair. Once a business partnership dissolves, the business is liquidated and closed. Bills are paid. Remaining money is split. Done. Depending on the size of the company (money involved), I might recommend using an attorney for this option.
- Offer to sell your interest to a third party with the consent of your partner. If the business is thriving, you might sell your stake at a premium and leave some money in the business. And, you might make an equity adjustment at the time of sale. Both of those can be an incentive for your partner to allow a deal. You get out. Your partner gets a more substantial stake. The business gets some cash. The buyer gets a chance at growing a business.
- Hire a mediator to help fix the partnership, effect a clean buyout, or divide the business into two separate entities. I’ve divided a couple of companies successfully. That can sometimes be a great option.
While it is possible to have a partner removed from a business, the process is long (can go 5 years) and costly. And, the result from any court case is uncertain. Rather than risk money and the uncertainty, there are other, cheaper, less stressful options to suing your partner. If there is a lot of money in the business, and if your partner is clearly guilty of criminal acts, it may be worth going to court.
I wish you the best in your quest for a satisfactory resolution.
Chris Reich, Business Mediation
“I understand how much anger you feel if you want your partner legally removed from the business. But don’t let your emotions cost you money on an uncertain outcome. Consider your options. Get good advice before you act.”
Locking a partner out is a risky move. The locked-out partner has rights that if violated could entitle him to reinstatement and damages.
There are many things to cover in a solid Partnership Agreement. In this video, I’ll explain the items that need to be covered. You may have other items to include as well. Keep in mind that there are many ways to address each clause. My job is to offer you options and to help partners agree on how they want to address every line item.
Your Partnership Agreement protects your interests. Ideally you would go to a qualified business attorney and have the proper legal document drafted. But if you are putting it off because of the expense, you can get the key items on paper to protect you and your business.
There are times when you legally can and should lock your partner out of the business. But, those are rare circumstances. Locking your partner out, even if your partner is showing bad behavior, open you to potential liability.