Business Partnership Advisor
Together, we can fix your business and partnership problems
Chris Reich, Business Luminary
How to Deal with a Crazy Business Partner
Are you dealing with an irrational business partner? If so, the rules of engagement are very different and swift action is advised.
It Doesn’t Matter if Your Partner is Unbalanced or Just a Jerk
Some people are just jerks. In business, they are seemingly nice until you are tied up and then things change. These stories are common. “I thought we were friends but after a couples months in business he started acting weird. He wouldn’t tell me about calls and won’t let me see the books.”
I always ask the question, “Was he always a little strange or is this behavior new?”
Interestingly, the answer is usually a little sheepish, “he’s always been kinda weird, but this is different. Like, weirder.” Then they tell me about feeling stupid because they “never should have done this.” Don’t ever feel guilty about making a mistake. I always tell people who call me to set aside your feelings of failure and move forward intelligently. You’re only a failure if you stay on the same course knowing your partner is taking advantage of you.
Of course, there are some people who have mental imbalances. We want to discern what we’re dealing with by talking about your case in detail. Sometimes, we can fix partnerships when a partner has a genuine condition such as bipolar disorder. A gentle recommendation to seek help can sometimes fix the problem. However, even if the nasty behavior is a result of a genuine disorder or not, you must still look out for your interests.
You Are Being Frozen Out
This is how the partnership deteriorates. The jerk partner will start freezing you out of key parts of the business. “You don’t need to be in the books. I don’t want it messed up. If you have a question, ask me.” Then they work a combination of blaming you for one thing while they do another without talking with you. The last one of these went like this, “you were supposed to handle the marketing, but our sales went down. Since aren’t doing anything, I signed up for the [TV ad? Radio? Coupon book? You can insert the money wasting expense here].
You don’t feel like you’re part of the process like you used to be. You can’t get answers and don’t know what to do next. You are feeling trapped. It’s stressful, and it’s not fun.
Being trapped in a stressful partnership with a crazy partner is very stressful.
Chris Reich, Business Advisor
Partner Won’t Talk About a Solution
The communication stops. Now you feel stuck. The business is going down but there isn’t much you can do. Every conversation leads to an argument. You want out, but your name is on the lease, the startup loan, and a couple of credit cards.
Offer to buy your partner out? He refuses. Offer to let him buy you out? Nothing. He offers nothing and won’t discuss your exit.
How to Negotiate with an Irrational Business Partner
Now what? You have a partner who blames you for everything. You can buy him out. He won’t buy you out.
Step 1: Offer help. Remember, you never what all the stresses are in a person’s life. At least offer.
Step 2: Take charge. You must take charge of your situation. When people make unreasonable demands or simply refuse to communicate, you have to act to protect your interests.
First, you send a registered letter to your partner of your intention to dissolve the partnership. If there is a lot of money involved, you might consult with an attorney. If you don’t expect a buyout and just want out, you can probably handle things with a little guidance.
Next, you need to make a list of all the liabilities and all of the assets. Settling this stuff will be complicated with a partner who refuses to communicate but, his refusal will work in your favor if this ends up in court. The next step is to notify the creditors. You’ll need to get things paid off unless your partner wants to continue with the business. If he does, you’ll need to have your name removed from ALL debts. ALL. That includes the lease. Get everything in writing. Don’t trust your partner to transfer all debt into his name.
The final step is to file the formal dissolution of partnership with your state. Boom. You’re done.
When you find yourself trying to negotiate with an irrational business partner, don’t. Don’t negotiate. Act.
If you haven’t got a Partnership Agreement and your partner refuses to sign one, act. That’s a clear signal that it’s time to go.
If you have a partner who will not include you in big decisions, start the process of getting out.
If your partner won’t negotiate, don’t keep trying. Document your attempts and then act.
If your partner won’t negotiate and is making unreasonable demands, and if you want to continue (though you shouldn’t), you can have a solid Partnership Agreement drafted. You can tell your partner to sign or the business closes.
If you put up all the money to start the business and now your partner is taking control and freezing you out, document your capital contribution and put the business up for sale.
In short, if your partner won’t work with you on a rational basis, get out of the partnership. Period.
Chris Reich, Business Adviser
“If your partner isn’t rational, won’t negotiate with you, or is a complete jerk, don’t try to negotiate further. Work on getting clear.”
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.