Surviving a Business Divorce without Losing Your Sanity

Business relationships and marriages have a lot in common. They start with passion and the best of expectations for the future. They require lots of communication and experience peaks and valleys. And like a marriage, business relationships sometimes also end. The separation of business partners is sometimes referred to as a business divorce.

As anyone who has ever had a business partner will know that the comparison to a marriage is an apt one. Divorce for married couples runs the spectrum from amicable to knock-down-drag-out. Likewise, a business divorce can be clean, or it can be rife with emotions, egos, and expensive, protracted litigation. Instead of deciding who gets to keep the china and silverware, business partners must deal with staff, equipment. Few business divorces are pleasant, but they needn’t to be ugly. If business partners will keep the following key points in mind early on in the relationship, they can ensure that any possible separation down the road will be much less painful.

Choosing Your Partner

Just as individuals seek compatibility in a marriage partner, business partners who plan for longevity would be wise to assess compatibility prior to forming a new business. Prospective business partners should consider whether they are compatible in communication styles and thought processes. Do they complement each other’s strengths and weaknesses? One partner may have a certain skill or know-how but possesses little experience growing a business while the other knows how to run a business but contributes little in the way of technical knowledge.

As any married couple knows, getting along is easy when times are good but the real test of the relationship comes when times are tough. So too business partners should consider how well they work together in high-pressure situations. When challenges arise, do both partners roll up their sleeves and work to a solution or does one partner fold under pressure or worse become hostile and critical? This may be the most important consideration of all because it will determine not only the tone of the partnership but also whether dissolution is likely to be collaborative or combative.

The Partnership Agreement

Some couples sit down before a marriage and consider what will happen in the unfortunate event the marriage comes to an end. The resulting document from this exercise is known as a prenuptial agreement (prenup). In a partnership, such a document is called a partnership agreement. The difference between the two is that requesting a prenup may result in hurt feelings but a request for a partnership agreement should never be met with hostility. In a business, having explicit, understandable language about processes, protocols, expectations, and exit procedures is widely acknowledged as sensible and even smart. As the partnership goes through growing pains and matures, partners should return to this agreement regularly to update it as needed and ensure that it reflects any changes to the partnership that have occurred since the last update.

Counseling

The true test of a partnership or marriage occurs when disputes inevitably arise. Many married couples bring in a third party for insight and guidance: a marriage counselor. Business partnerships can benefit from the same. Consultants, advisory boards, and special committees can provide fresh, objective insight necessary to develop practical solutions and mutually beneficial goals. These third parties can wear many different hats for the partnership from serving as an intermediary during a disagreement to a third party during brainstorming to a tie-breaker in the event of a stalemate.

The Divorce

All long-term relationships experience ups and downs. Some weather them and some do not. Business partnerships are no different. Sometimes the business has grown successful and one partner wants to step away to take on a new challenge. Other times hostility has built to the point of threatening the ability to operate the business. Whatever the cause, the effect is the same: the partnership must end. Partners who have followed the advice in this post will have a much easier path to dissolution then those caught unawares. Many of the hard decisions such has how to divide custody of assets, customer lists, and intellectual property and how to value shares will have already been made long ago.

Our Chicago partner and LLC member dispute attorneys have litigated business divorce, stolen corporate opportunity, breach of fiduciary duty, and shareholder oppression lawsuits for more than three decades. We have prosecuted and defended LLC member or shareholder squeeze-out and freeze-out cases in a wide variety of business contexts. We spend considerable time going over all the business and accounting issues to develop a comprehensive strategy for prosecuting and defending the claims that arise in the case.

Serving clients throughout Cook, DuPage, and surrounding counties, our business litigation attorneys have acted as lead counsel in accounting actions including a complex dispute involving tens of millions of dollars in damages that was resolved through an extended multi-year trial where we worked closely with the accounting and damages experts to develop winning strategies. We also have a great deal of experience finding accounting irregularities with the assistance of forensic accountants and amassing testimony and evidence confirming those irregularities. Our value to our clients comes from our ability to present evidence in a clear and concise manner that makes even the most complex legal concept easy to understand. Having worked with many different accountants we have developed successful strategies for presenting the complex accounting and capital structure issues in a manner that portrays our client’s position in the best manner to the court. We offer free consultations to let business owners, shareholders or LLC members decide if we are the best attorneys to represent their interests in complex shareholder or LLC freeze out litigation. To set up a consultation with one of our Chicago LLC member dispute attorneys and Chicago business trial lawyers, please call us toll-free at 833-306-4933 or contact us online.

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