Do Not Stop Working if You Want to Leave the Partnership

Chris:

My business partner hasn’t shown up to work for 4 months and now he wants me to buy him out! He also wants back wages. That is totally unreasonable. Can I treat this as an abandonment?

Partner Stopped Working?

This is a situation that is both common and understandable. When the business partnership breaks down, the darker sides of the personalities come through. A dominant partner turns into a bully. A person who does not do well with conflict will withdraw. As the bully gets more aggressive, the pacifist withdraws further. Eventually, the bully gets so angry they are ready to lock the other partner out. The pacifist quits coming in. The next blowout is over money. The course is as logically predictable as what will happen to your car if you hit the highway with no oil in the engine. It will get louder and louder until the engine seizes.

Logical Doesn’t Make It Right

As understandable as it is to not want to go to work when the environment turns toxic, it’s not a good way to handle the situation. If your partner is frustrating you, ask for a time to talk. Sit down together when you can speak privately and without interruption. If you can get that far, propose that you bring in a mediator to help work through the communication issues. That is the best way to get a tense partnership under control.

By not coming in, you put yourself in a position that justifies your business partner’s frustration. It doesn’t justify nasty behavior but it takes a lot of skill to talk through the argument that says, “of course I’m pissed off! He hasn’t worked for 4 months and still expects a paycheck!” Disputes like this never end well unless there is professional intervention, early. Early. Once a partner stops participating, the business itself might be at risk.

When a partner stops working, it could lead to a charge of abandonment. By not participating, you may be failing to keep your fiduciary responsibilities. That’s a legal question and my goal is always to keep partnership disputes out of court. So let’s not go there.

Don’t Wait Until There Is a Blowout

If tension is rising in your business partnership or if you no longer want to go to work because of your partner, talk with a business mediator. If your partner has quit showing up, talk with a mediator. A mediator is a lot less expensive than getting lawyers involved.

How Does Partnership Mediation Work?

I can’t speak for other mediators but I can explain how I work. Once the partners have agreed to a mediation process, I will have a call with each party separately. This allows all parties to express their thoughts to me privately, without pressure or judgment. It’s a bit like a rehearsal in that it gives a chance to put in words what has been leading to the tension. Once everyone (there could be more than 2 partners) has had a chance to help me understand the issues, we schedule group video conferences. I guide the meetings and make sure we stay on business topics. It’s important to address the problems with respect and a desire to find resolution.

Do We Try to Fix the Partnership or Dissolve It?

Whether we try to repair the relationship or move directly to figuring out how to fairly separate is up to you. I’ve seen some pretty bad partnerships get on a better course by clearly defining duties and responsibilities. Sometimes a partnership needs a defined compensation plan. That’s important when there are sales commissions involved and partners struggle with uneven production. I’ll write more on that in a later post. For now, let’s just say that getting definition into a partnership can help many of the most common issues that arise.

Some partnerships are beyond repair or never should have been formed. When the partners disagree over the vision for the company or have very different business styles, it’s probably best that they separate. If that’s the case, I will help the partners find a fair way to value the interest of whoever decides to leave. There is a lot more to dissolving a partnership than just finding a price. There are lots of little items to work out. Will there be an agreement to not compete? Will the departing partner keep her cell phone? Are there leases in both names that will need to be changed? It can get pretty complicated but that’s where I can help. Having been there many times before, I can help you work out the details and draft a fair deal that all parties can accept.

Mediator Cost

Mediators use different fee schedules. Some charge by the hour with set minimums. Some charge by the day. I charge by the hour at a rate that is half or less than a business lawyer. And, because I am helping with a non-adversarial process, you only need me. If people “lawyer up” in a business dispute, each party needs a lawyer and the company will need its own lawyer. Three lawyers at $500 and up per hour gets expensive. And, with lawyers, the process can take much longer as each attorney prepares position letters and awaits responses from the other side or sides. I have a lot of respect for lawyers, don’t misunderstand me. But, a good lawyer will tell you that if you can work it out without lawyers, do so. We can bring in the lawyers to draft documents after we find agreement. Saves everybody time and money.

Summary

If you are fed up with your business partner, do not stop working at the business. If your partner has stopped coming to the business, call me. When partners stop working together, the dispute gets a lot harder and more expensive to resolve. And once lawyers get in the game, things can get very expensive. The problem with partnership disputes is that the law takes a hands-off approach. As adults, it’s your business, work it out. If it goes to court, expect $40,000 [2020 rates] or more in legal fees (each) and 3-5 years to complete. And then? Most likely the court will order a dissolution of the business. But, you might win. In that case, the court may have you pay your partner a given amount for their share and you keep the business—and pay your lawyer. [Legal fees are seldom awarded in partnership disputes]

Mediation cost is typically less than 10% of the cost of fighting it out with lawyers. The best part is that mediation will minimize the damage to the business.

In a dispute with your business partner? Call me! (530) 467-5690

Chris Reich, Business Mediator

“If you are fed up with your business partner, do not stop working at the business. If your partner has stopped coming to the business, call me.”