How you go about handling the situation [of a business partnership
split-up] can mean the difference between an amicable split, where you run the
business as you see fit, and a messy divorce, in which you wind up losing
money, clients, resources or other critical assets.
In every end there is a
beginning. When it comes to the founders of a business, there also ought to be
an end. An amicable end.
As Stephen Covey noted so
adroitly, one of the keys to effectiveness is to “begin with the end in mind.”
Accordingly, the founders of a business should structure and run the business
with a clear commitment to their shared ultimate goals for themselves and their
business. In the vernacular of business planning, this oftentimes is called
If you fail to “begin with the
end in mind” and make legal plans to memorialize the end game for your personal
and business relationships, then you likely will only enrich lawyers. So, when
it comes time to part ways down the road, what steps should you be taking now?
The Wall Street Journal
recently addressed this subject in an article titled “Breaking Up (With a Co-Founder) Is Hard to
One key takeaway from the
article is the “when and how” of exit planning. The best time to address the
issue is when the business is founded. Consequently, the best way to
memorialize the exit strategy in the event of the disability, retirement or death
of a founder is through various legal documents created when the business is
founded. For example, an Limited Liability Company (LLC) can use the LLC
Operating Agreement, while a corporation may use its Bylaws or various
Regardless, one thing is clear:
do not bury your head in the sand. For every business, an “exit” will be
required. As a result, you can either make plans now, or leave it up to lawyers
to clean up (literally) later.
Reference: The Wall Street
Journal (September 22, 2012) “Breaking Up (With a Co-Founder) Is Hard to